United States v. Nicodemo Scarfo ( 2022 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
Nos. 15-2811, 15-2826, 15-2844, 15-2925, 19-1398
_____________
UNITED STATES OF AMERICA
v.
NICODEMO S. SCARFO, SALVATORE PELULLO,
WILLIAM MAXWELL, and JOHN MAXWELL,
Appellants
_______________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Nos. 1-11-cr-0740-001 thru 004)
District Judge: Honorable Robert B. Kugler
_______________
Argued
July 6, 2021
Before: AMBRO, JORDAN, and BIBAS, Circuit Judges
(Opinion Filed: July 15, 2022)
_______________
Michael E. Riley [ARGUED]
Law Offices of Riley and Riley
2 Eves Drive – Suite 109
Marlton, NJ 08053
Counsel for Nicodemo S. Scarfo
Troy A. Archie [ARGUED]
Afonso Archie & Foley
21 Route 130 South
Cinnaminson, NJ 08077
Counsel for Salvatore Pelullo
Michael N. Huff [ARGUED]
1333 Race Street
Philadelphia, PA 19107
Counsel for William Maxwell
Mark W. Catanzaro
21 Grant Street
Mount Holly, NJ 08060
Counsel for John Maxwell
Rachel A. Honig
Sabrina G. Comizzoli
Mark E. Coyne
Bruce P. Keller [ARGUED]
Office of United States Attorney
970 Broad Street – Room 700
Newark, NJ 07102
2
Norman Gross [ARGUED]
Office of United States Attorney
401 Market Street
Camden, NJ 08101
Counsel for Appellee
_______________
OPINION OF THE COURT
_______________
3
TABLE OF CONTENTS
I. Overview ..................................................................... 7
II. Background ................................................................. 8
A. The Organized Crime Origins ........................... 8
B. The FirstPlus Takeover ................................... 10
C. The FirstPlus Fraud ......................................... 14
D. The Investigation and Takedown .................... 19
E. The Damage .................................................... 20
F. Indictment and Pretrial Proceedings ............... 21
G. Trial ................................................................. 23
H. Post-Trial Proceedings and Sentencing........... 26
I. Appeals ............................................................ 26
III. Investigation Issues .................................................... 27
A. Collection of Pelullo’s Cell Site Location
Information ..................................................... 28
B. Filter Teams ................................................... 37
1. Background .......................................... 38
2. Challenges to Filter Team Procedures . 41
3. Challenges to Ex Parte Proceedings .... 44
4. Crime-Fraud Exception ........................ 47
IV. Pretrial Issues ............................................................. 48
A. Speedy Trial Act Claim .................................. 49
B. Admission of La Cosa Nostra Evidence and
Denial of the Maxwells’ Motion for Severance
......................................................................... 54
1. Admission of LCN Evidence ............... 55
2. Denial of the Maxwells’ Severance
Motion .................................................. 62
V. Trial Issues ................................................................. 65
A. Scarfo’s Joint Trial with Former Counsel
Donald Manno ................................................. 65
1. Background .......................................... 67
4
2. Sixth Amendment ................................ 68
3. Due Process .......................................... 72
B. Pelullo’s Sixth Amendment Ineffective
Assistance of Counsel Claim ......................... 74
1. Background .......................................... 74
2. Ineffective Assistance of Counsel Claim
.............................................................. 78
C. Convictions for RICO Conspiracy Under 18
U.S.C. § 1962(d) ............................................. 84
1. Constructive Amendment of Indictment
.............................................................. 85
2. Jury Instructions and Sufficiency of the
Evidence .............................................. 89
D. Firearm Conspiracy Conviction Following
Rehaif ............................................................. 90
E. Sufficiency of Evidence to Support William
Maxwell’s Convictions .................................. 95
1. Conviction for Conspiracy to Unlawfully
Transfer or Possess a Firearm .............. 95
2. Convictions for Wire Fraud and
Conspiracy to Commit Wire Fraud ...... 98
F. Juror Issues ................................................... 101
1. Background ........................................ 101
2. Disclosure of the District Court’s First
Conversation with Juror #8 ................ 110
3. Purported Coercion of the Jury by the
District Court...................................... 113
4. Purported Coercion of the Substituted
Juror by Other Jurors.......................... 117
5. District Court’s Response to Report of
Juror Misconduct................................ 122
VI. Sentencing Issues ..................................................... 124
A. Pelullo’s Sentencing Challenges .................. 125
5
1.Guidelines Sentencing Range
Calculation ......................................... 126
2. Loss Amount Enhancement ............... 129
3. Victim Number Enhancement............ 133
4. Substantive Reasonableness............... 136
B. Joint and Several Forfeiture Liability Following
Honeycutt ..................................................... 136
1. Background ........................................ 136
2. Honeycutt and Its Progeny ................. 139
3. Post-Honeycutt: John Maxwell .......... 141
4. Post-Honeycutt: Pelullo...................... 142
C. Delay in Forfeiture of Pelullo’s Property ..... 144
1. Background ........................................ 144
2. CAFRA .............................................. 148
3. Due Process ........................................ 150
VII. Brady Issues ............................................................. 155
A. Denial of Scarfo’s Request to File a Motion for
a New Trial Pursuant to Rule 33(b) ............. 156
B. Pelullo’s Motion for Remand Based on Giglio
Evidence ....................................................... 161
VIII. Conclusion ............................................................... 169
6
JORDAN, Circuit Judge.
I. OVERVIEW
Everybody calls me a racketeer. I call myself a businessman.
– Alphonse Gabriel Capone
The four appellants before us – Nicodemo Scarfo,
Salvatore Pelullo, William Maxwell, and his brother John
Maxwell – were convicted for their roles in the unlawful
takeover and looting of FirstPlus Financial Group, a publicly
traded mortgage loan company. Their scheme commenced
with the Defendants’1 and their co-conspirators’ extortion of
FirstPlus’s board of directors and its chairman to gain control
of the company. Once they forced the old leadership out, the
Defendants proceeded to drain the company of its value by
causing it to enter into expensive consulting and legal-services
agreements with themselves, causing it to acquire (at vastly
inflated prices) shell companies they personally owned, and
using bogus trusts to funnel FirstPlus’s assets into their own
accounts. The Defendants and their crew ultimately
bankrupted FirstPlus, leaving its shareholders with worthless
stock.
Each Defendant was convicted of more than twenty
counts of criminal behavior and given a substantial prison
1
We use the capitalized term “Defendants” to refer to
the four individuals who were convicted and are now
appealing, and “defendants” with a lower case “d” to refer to
everyone who was indicted and part of the proceedings before
the District Court.
7
sentence. Now, in this consolidated appeal, their combined
efforts challenge almost every aspect of their prosecutions,
including the investigation, the charges and evidence against
them, the pretrial process, the government’s compliance with
its disclosure obligations, the trial, the forfeiture proceedings,
and their sentences. Although they raise a multitude of issues,
only one entitles any of them to relief: the government has
conceded that the District Court’s assessment of John
Maxwell’s forfeiture obligations was improper under a
Supreme Court decision handed down during the pendency of
this appeal. Having jurisdiction pursuant to 28 U.S.C. § 1291and 18 U.S.C. § 3742(a), we will affirm all the convictions and
sentences, except for the forfeiture portion of John Maxwell’s
sentence. We will remand that for the District Court to reassess
what share of the forfeiture sum he should pay.
II. BACKGROUND2
A. The Organized Crime Origins
This case has its roots in organized crime, and, like other
mob cases, it gets its start with family – both biological and
made. Nicodemo Domenico “Little Nicky” Scarfo Sr. was the
“boss” of the Philadelphia branch, or “family,” of La Cosa
2
The following factual background is based on the
evidence adduced at trial and is cast in the light most favorable
to the prosecution. See United States v. Pungitore, 910 F.2d
1084, 1097 (3d Cir. 1990) (“We are bound, after a jury has
delivered a guilty verdict, to interpret the evidence in a light
most favorable to the government.”).
8
Nostra (“LCN”) for most of the 1980s.3 See United States v.
Pungitore, 910 F.2d 1084, 1098 (3d Cir. 1990). He oversaw
nearly a decade of murders, gambling, and extortion for the
benefit of LCN. Id. at 1097-1102; see also United States v.
Scarfo, 850 F.2d 1015, 1016 (3d Cir. 1988).
By the time the Defendants here began their FirstPlus
scheme, however, he was out of the game, serving a lengthy
federal prison sentence. Pungitore, 910 F.2d at 1152. His son,
Nicodemo Salvatore “Nicky” Scarfo (the “Scarfo” in this
opinion), wanted to fill the power vacuum, but his attempted
takeover of the Philadelphia LCN family did not go according
to plan. On Halloween in 1989, as he was having dinner at a
restaurant, masked assailants ambushed him, shooting him
several times but, no doubt to their chagrin, not killing him.
When he recovered, Scarfo sought the help of the
Lucchese LCN family, which operated in northern New Jersey.
He had an “in” with the Luccheses: their boss was incarcerated
in the same prison as his father. According to the government’s
expert on the structure and operations of LCN, eventually the
3
“La Cosa Nostra” is “an Italian phrase which literally
translates as ‘our thing’ or ‘this thing of ours.’” Pungitore, 910
F.2d at 1097 n.3. According to an FBI agent who testified at
trial, the word “mafia” – despite its ubiquity in discussions of
mobsters – refers to Italian organized crime based in Italy,
while LCN is based in the United States. (JAC at 8282.) LCN
is headed by a commission of “bosses,” who in turn direct the
illegal activities of regional organized crime “families.”
Pungitore, 910 F.2d at 1097. A family is “a highly structured
criminal enterprise with a well defined chain-of-command”
comprising multiple layers of operatives. Id. at 1098.
9
Lucchese family integrated Scarfo into their organization as a
“made member” – someone who has been “fully inducted” and
has “taken an oath of loyalty to the family.” (JAC at 8280-81.)
Being a made member meant that he had to generate money for
the Lucchese family and share with it the profits of any
criminal activities he pursued.
Scarfo’s longtime friend Salvatore Pelullo, although not
a blood relative, had a close relationship not only with Scarfo
but with Scarfo’s father too. The older Scarfo treated Pelullo
as his nephew. Pelullo became an “associate” of the Luccheses
– a criminal colleague who hadn’t been “formally initiated into
[the family’s] ranks.” Pungitore, 910 F.2d. at 1098. The
government’s expert testified that an associate like Pelullo had
to “share … the profits of any of [his] criminal activity” with
the family, and he had to answer to a made member, such as
Scarfo, who would “supervis[e] and direct[]” his actions. (JAC
at 8286-87 (trial testimony of government LCN expert).)
Before the events at issue in this case, Scarfo and
Pelullo had each earned criminal convictions. Scarfo was
convicted in 1990 of assaulting a woman in a hospital elevator,
and then in 1993 for racketeering conduct. In 2002, he was
convicted of running an illegal gambling business. Pelullo,
meanwhile, was convicted of bank fraud and making false
statements to the SEC in 1999. Three years later, he pled guilty
to wire fraud.
B. The FirstPlus Takeover
In 2007, Scarfo and Pelullo stumbled on “the golden
vein of deals” – an opportunity that seemed so lucrative, they
thought they could ride it into retirement. (JAC at 1781-82.)
10
That opportunity was FirstPlus, a Texas-based mortgage
company whose main operating subsidiary had recently exited
bankruptcy after falling on hard times. Following that
restructuring, FirstPlus began receiving periodic, multi-
million-dollar “waterfall” payments from its bankruptcy trust.4
At that point, it was essentially a dormant parent company
receiving the waterfall payments but doing no business.
After the payments started coming in, a former FirstPlus
employee, Jack Roubinek, had the idea to locate investors and
gain control of FirstPlus. In early 2007, he contacted his
attorney, William Maxwell, and asked him to research the
possibility of investing in FirstPlus. At around the same time,
Pelullo learned about FirstPlus from his business acquaintance
David Roberts, a mortgage broker from Staten Island. A group
including Pelullo, Roberts, Scarfo, Roubinek, and Gary
McCarthy (Pelullo’s attorney and an eventual codefendant)
4
As part of the subsidiary’s bankruptcy, a creditor’s
trust was set up to pay the subsidiary’s creditors, one of which
was FirstPlus, which held an unsecured claim against its
subsidiary. Income generated by the subsidiary from
outstanding mortgages and investments flowed to the trust,
which paid it out to creditors in order of priority, creating a
“waterfall” of payments. Several years later, a grantor’s trust
was established as a result of litigation with shareholders. That
second trust was interposed between the creditor’s trust and the
creditors: a portion of the money coming into the creditor’s
trust was routed to the grantor’s trust, and from there it was
disbursed to FirstPlus, other creditors of the subsidiary, and
FirstPlus shareholders.
11
gathered in Philadelphia to discuss a potential takeover of
FirstPlus.
At first, according to Roberts, their thinking was “to try
to raise money to buy [FirstPlus’s] stock[.]” (JAC at 1791.)
That plan, however, fell through: the group realized that none
of them had the money needed to buy the stock. Luckily for
them, however, FirstPlus had recently fired Jack Draper, a
high-ranking employee. Draper had griped about his firing to
Roubinek – the two having become acquainted while
employed at FirstPlus – and to William Maxwell.5 Those three
were joined by Roberts and Pelullo for a meeting in Dallas,
where Draper, bearing a grudge, told the group he was willing
to “divulge all” and accuse the FirstPlus board and CEO Daniel
Phillips of financial improprieties. (JAC at 1813-16 (trial
testimony of Roberts).)
That “completely changed the direction of the plan.”
(JAC at 1815.) Seeing an opportunity, Pelullo, who was
emerging as the leader of the takeover group, worked with
William Maxwell to send letters to Phillips and other board
members. The letters were purportedly written by Draper and
threatened that he would go to “the FBI, the IRS[,] the U.S.
Attorney’s [O]ffice[,] [FirstPlus’s] Bankruptcy’s attorney and
the SEC” with claims of financial misconduct including
bribery, money laundering, and Sarbanes-Oxley violations. 6
5
William Maxwell’s brother, John, is another of the
Defendants here. We thus refer to each Maxwell brother using
either his full name or just his first name.
6
The Sarbanes-Oxley Act of 2002 was enacted “[t]o
12
(JAC at 1822.) They also threatened to tell Phillips’s wife –
who was then divorcing him – that Phillips had raped an
assistant and used the company’s moneys to pay off the victim
when she got pregnant. According to Phillips, all those claims
were false, but he was nonetheless concerned that their
dissemination would cause grave damage to his and the
company’s reputations.
The letters had their intended effect. Phillips met with
William Maxwell and Pelullo, who indicated the allegations
would be dropped if Phillips and the FirstPlus board handed
the business over to them. Evidently, it was an offer he
couldn’t refuse.
Phillips swiftly persuaded the entire board to give up
their positions rather than try to engage in what would be a
messy and expensive fight with Pelullo’s group. Pelullo then
selected a new board of directors for FirstPlus: William
Handley (a friend of Pelullo’s who took over as Chief Financial
Officer), John Maxwell (William Maxwell’s brother and the
titular Chief Executive Officer), Roberts (who became
secretary of the company), Harold Garber (Scarfo’s father’s
attorney, who became the new board chairman), and Robert
O’Neal (one of William’s clients, who later succeeded Garber
safeguard investors in public companies and restore trust in the
financial markets[,]” Lawson v. FMR LLC, 571 U.S. 429, 432
(2014), by mandating that public companies take particular
steps to assure the integrity of their audits and financial reports.
13
as chairman). 7 The necessary corporate formalities were
followed and, on June 7, just four days after sending the
threatening letters, Pelullo and his cronies had total control of
the company.
C. The FirstPlus Fraud
With FirstPlus in their power, the new officers and
directors went to work – making the company work for them.
Pelullo, along with William Maxwell, controlled the show.
They even obtained stamps of the directors’ signatures so they
could run the looting scheme without interference.
The board entered into a “legal services agreement”
with William, who became FirstPlus’s “special counsel.”
(JAC at 5315-16; JAD at 1653, 1673-75.) The contract
formally granted him significant power within the organization.
It purported to give him “[a]ll legal authority for any matter
involving” FirstPlus; the power to select and retain legal
counsel, accountants, and, “in [his] sole discretion,” “any and
all consulting firms”; and the right to “spend funds, incur legal
expenses, and to expend fees in excess of [his] retainer and to
seek reimbursement[.]” (JAD at 1673-75.) He could also
“restrict disclosure of information … to any person[,]”
including the members of the board. (JAD at 1674-75.) For
his supposed labors, William made $100,000 a month, plus
expenses of up to $30,000.
7
William Handley and John Maxwell became
codefendants in this case.
14
With that authority, William hired Pelullo as a
consultant to FirstPlus, a role that shielded him from public
scrutiny. In practice, though, Pelullo was the “de facto
president” of the company, according to FirstPlus’s public
auditor, Anthony Buczek. (JAC at 7069.) John Maxwell was
named as CEO, but he largely functioned under Pelullo’s
control.
Using his controlling position at FirstPlus, and with
William’s help, Pelullo set up several channels through which
money flowed out of FirstPlus’s accounts and into his and
Scarfo’s coffers. For one, Pelullo set up a bogus trust that
ostensibly had his children as its beneficiaries. In practice,
however, according to codefendant Cory Leshner, the trust was
“created for the purposes of owning” Seven Hills Management,
LLC, a company with Pelullo’s brother-in-law, Alexander
Lyubarskiy, listed as its head.8 (JAC at 3661.) Lyubarskiy’s
supposed management of Seven Hills was strictly for show;
“[e]verything he did was at the direction of Mr. Pelullo.” (JAC
at 3665.)
William Maxwell, on FirstPlus’s behalf, retained Seven
Hills to provide FirstPlus with “consulting services.” (JAD at
675.) The agreement entrusted Seven Hills (and, through it,
Pelullo) with “a litany of duties” that Leshner summarized as
“helping run the entire operation” of FirstPlus. (JAC at 3755.)
Seven Hills was compensated $100,000 each month, plus
$15,000 in expenses.
8
Leshner served as Pelullo’s personal assistant and a
vice president of Seven Hills.
15
Scarfo, meanwhile, profited from FirstPlus as well.
Like Pelullo, he set up a trust that was nominally intended to
“benefit[] [his] daughter” but in actuality served as a vehicle
for his own gain. (JAC at 3673, 4026 (trial testimony of
Leshner).) That trust, in turn, owned Learned Associates of
North America, LLC (“LANA”); both entities were run “[o]n
paper” by Scarfo’s cousin and codefendant John Parisi. (JAC
at 3675.) That was a ruse to keep Scarfo’s name off the books;
“[i]n reality,” it was Scarfo, not Parisi, who controlled the trust
and LANA. (JAC at 3673-75.) LANA enabled Scarfo to get
in on the take through a secondary consulting agreement
between LANA and Seven Hills. The agreement obliged
LANA to perform for FirstPlus “exactly the same” tasks that
Seven Hills was already being paid to do, according to an FBI
investigator. (JAC at 579.) In practice, LANA performed no
work, but the deal entitled LANA (and, through it, Scarfo) to a
roughly one-third cut of what Seven Hills was getting from
FirstPlus. As the government puts it, those payments were
“effectively ‘tribute’” to Scarfo. (Answering Br. at 18.)
Those arrangements were all facilitated by William
Maxwell, to whose attorney trust account the consulting fees
and expenses were wired. William generally passed those on
to Seven Hills, which in turn sent $33,000 a month, plus so-
called expenses, to LANA. Pelullo was “completely involved
with” and oversaw the flow of money from FirstPlus to
Maxwell and on to the consulting firms. (JAC at 3933 (trial
testimony of Leshner).)
Pelullo and Scarfo also profited from FirstPlus by
having it acquire three shell companies they owned. First up
was Rutgers Investment Group, LLC, an unsuccessful
mortgage loan provider majority owned by LANA and Seven
16
Hills. Rutgers’s single source of revenue was receivables it
supposedly got from Shore Escapes, a defunct vacation sales
company also owned by Seven Hills and LANA. It was make-
believe money, but on June 7, the new team’s first day in office,
Pelullo got approval for the acquisition from the FirstPlus
board, and the following month FirstPlus bought Rutgers for
approximately $1.8 million and 500,000 FirstPlus shares.
Two more acquisitions of companies owned by Seven
Hills and LANA followed soon after. FirstPlus bought
Globalnet Enterprises, LLC, a financially struggling cleaning
company, for around $4.5 million and more than one million
shares of FirstPlus stock. It then paid $725,000 – including
$100,000 directly to each of Seven Hills and LANA – to buy
The Premier Group, LLC, a company that Pelullo set up in May
2007 to hold the assets of a company at least nominally in the
business of representing the interests of insurance
policyholders.
Pelullo made sure that FirstPlus bought his and Scarfo’s
companies on preposterously favorable terms. To conduct
valuations of the target businesses, he brought in Kenneth Stein,
the head of a business brokerage firm. Stein told Pelullo that
he (Stein) was unqualified to perform the valuations, but
Pelullo said to “[j]ust go get it done[.]” (JAC at 4743-44.)
Though Stein believed that the companies’ financials were
“horrific” and “atrocious” (JAC at 4841), Pelullo pressured
him into preparing nominally “independent” valuation reports
that overvalued the businesses. William Maxwell covered up
Pelullo’s involvement by listing his own name on the
engagement letters and handling Stein’s payments.
17
Also helping grease the skids were two of Pelullo’s
attorneys – David Adler and Gary McCarthy. Although
FirstPlus’s public filings said that the acquisitions were
“completed on an arms-length basis” (JAD at 2337), that was
not even remotely true. Pelullo had his lawyers on both sides
of the negotiating table, with Adler representing FirstPlus and
McCarthy representing the shell companies.
In the meantime, Scarfo, Pelullo, and William Maxwell
began to take advantage of their ill-gotten gains. Scarfo bought
a house and expensive jewelry for his wife; Pelullo purchased
a Bentley automobile; Scarfo and Pelullo together bought a
yacht; and William and Pelullo had FirstPlus acquire a plane
for their personal use. The scheme was working as planned.
Still, the fact that FirstPlus was a public company, with
disclosure requirements under federal securities laws, added
complications to the looting. To get around those requirements,
Pelullo hired Anthony Buczek as FirstPlus’s auditor, based on
a referral by Howard Drossner, who later became a
codefendant. Pelullo pressured Buczek into hiding or
obscuring material information about the company – such as
the Rutgers and Globalnet acquisitions, the consulting
agreements, and Pelullo’s prior federal fraud convictions 9 –
even though FirstPlus was required to disclose that information
in its SEC filings.
9
Pelullo knew that his prior felony convictions posed a
problem: he told Leshner that he “didn’t want to be on the
[FirstPlus] board of directors because of his previous
convictions.” (JAC at 3650-51.)
18
D. The Investigation and Takedown
The party had to come to an end, and eventually the
actions of the FirstPlus thieves caught up with them. While
investigating a tip that Scarfo was again trying to gain control
of the Philadelphia LCN, the Federal Bureau of Investigation
became aware of the mob ties and suspicious circumstances
surrounding the resignation and replacement of FirstPlus’s
former board. As FBI agents dug deeper, they came to believe
– rightly – that Pelullo and Scarfo were behind the FirstPlus
takeover and would systematically steal from it. They obtained
court permission to track the defendants’ locations through
their cellphones and wiretap their calls over the course of
several months. Among the calls that agents picked up were
communications between Pelullo and his lawyers (Maxwell,
McCarthy, and Donald Manno). To weed out any discussions
protected by Pelullo’s attorney-client privilege, the
government asked the District Court to review in camera the
records of wiretaps assembled by a special “filter team” before
they were transmitted to prosecutors 10 – all, of course,
unbeknownst to Pelullo.
The conspirators eventually came to suspect that they
were under investigation. For example, while on a long drive
from Dallas to deliver a gun to Scarfo’s house in New Jersey,
10
The filter team, which comprised both prosecutors
and investigators, reviewed the contents of the intercepted calls
between Pelullo and his lawyers to protect the attorney-client
privilege. See infra Section III.B.1. The filter team sought
court permission to transmit non-privileged communications to
the prosecution team. Id.19
John Maxwell suspected that the government had agents
following him in a car and in a helicopter.
The government’s investigation escalated on May 8,
2008. That day, the FBI executed search warrants at thirteen
locations across the country, including FirstPlus’s offices in
Texas and the defendants’ homes, offices, and law firms in
Pennsylvania and New Jersey. They also seized the plane, the
Bentley, and the yacht, along with guns they found on board
the yacht and more guns and ammunition found at Scarfo’s and
Pelullo’s homes and Pelullo’s office. It took another three
years for the government to obtain an indictment from a grand
jury, but that day did arrive. In unpacking the evidence and
building their case, prosecutors set up additional filter teams to
review the evidence recovered from McCarthy’s and Manno’s
law offices and to set aside anything that was privileged before
turning the rest over to the team handling the prosecution of
the defendants.
E. The Damage
When Scarfo, Pelullo, and their co-conspirators took
over the company in early June 2007, FirstPlus had almost $10
million in its accounts, and it received a $4.4 million waterfall
payment later that year. By the following May, when the FBI
seized the accounts, there was less than $2,000 left. Between
the fraudulent consulting and legal-services agreements
channeled through bogus trusts and the acquisitions of virtually
worthless companies, the conspirators had bled FirstPlus dry.
It soon fell into bankruptcy, leaving its more than 1,200 public
stockholders with the company’s husk.
20
F. Indictment and Pretrial Proceedings
In October 2011, a federal grand jury in New Jersey
handed down a twenty-five-count indictment against thirteen
defendants, based on the FirstPlus scheme. All four
Defendants before us – Scarfo, Pelullo, and the Maxwell
brothers – were charged with conspiring to participate in the
affairs of an enterprise through a pattern of racketeering
activity, in violation of the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. § 1962(d); conspiracy
to commit securities fraud, in violation of 18 U.S.C. § 371;
conspiracy to commit wire fraud, in violation of 18 U.S.C.
§ 1349; sixteen substantive counts of wire fraud, in violation
of 18 U.S.C. § 1343; conspiracy to commit money laundering,
in violation of 18 U.S.C. § 1956(h); conspiracy to commit bank
fraud, in violation of 18 U.S.C. § 1349; conspiracy to make
false statements in connection with a loan application, in
violation of 18 U.S.C. §§ 371 and 1014; and conspiracy to
transfer a firearm to prohibited persons, or to possess a firearm
by a convicted felon, in violation of 18 U.S.C. §§ 371 and 922.
In the RICO conspiracy count, prosecutors charged all four
Defendants with engaging in a pattern of racketeering activity
comprising various predicate acts: mail fraud, wire fraud, bank
fraud, obstruction of justice, extortion under the federal Hobbs
Act, interstate travel in aid of racketeering, money laundering,
and fraud in the sale of securities.
In addition, Scarfo, Pelullo, and William Maxwell were
charged with conspiracy to obstruct justice, in violation of 18
U.S.C. § 1512(k). Scarfo, alone, was also charged with being
a felon in possession of a firearm, in violation of 18 U.S.C.
§ 922(g)(1). And finally, the indictment sought criminal
forfeiture of assets acquired from the proceeds of the
21
defendants’ criminal misdeeds, including the vehicles, jewelry,
and other assets that had been seized pursuant to the search
warrants in 2008.
The other nine defendants, who were less involved in
the scheme, were charged with various combinations of those
counts, though none faced as many charges as did the four
primary Defendants. Five of the lesser players – Leshner,
Parisi, Drossner, Lisa Murray-Scarfo, 11 and Todd Stark 12 –
took plea deals before the case went to trial. Due to William
Handley’s poor health, the charges against him were severed
and eventually dismissed. That left three other defendants –
McCarthy, Adler, and Manno, all of whom were lawyers –
alongside the main four heading to trial.
Extensive motions practice, discovery, and pretrial
proceedings ensued, lasting more than two years. Given the
breadth of evidence and the amount of time it was going to take
all parties to get ready for trial, the District Court designated
the matter a “complex case” and so tolled the deadlines of the
Speedy Trial Act.
The parties also engaged in comprehensive briefing and
argument on numerous issues, some of which are relevant here.
11
Lisa Murray-Scarfo is Scarfo’s wife, who, along with
the four primary Defendants, was indicted for conspiracy to
commit bank fraud and conspiracy to make false statements in
connection with a loan application.
12
Stark worked for Seven Hills as Pelullo’s driver and
was indicted for conspiring to get Pelullo a firearm.
22
Multiple defendants, including both Maxwells, sought to sever
their trials, particularly from Scarfo’s and Pelullo’s. The
District Court denied those motions. In early 2013, Pelullo
unsuccessfully tried to have the charges against him dismissed
on the basis of the Speedy Trial Act, complaining that the
government and the Court were taking too long to bring the
case to trial. Later that year, Pelullo asked the Court to order
that the yacht and the Bentley, among other assets, be returned
to him, which the Court refused to do.
G. Trial
Trial for the seven remaining defendants kicked off on
January 8, 2014. Because the case involved organized crime,
the District Court empaneled an anonymous jury. All
defendants were represented by counsel, except for Manno,
who proceeded pro se. To simplify the proceedings, the
District Court allowed any motion by one defendant to count
as having been made on behalf of all the defendants.
Still, conducting a joint trial for seven defendants facing
twenty-five counts in a complex case proved challenging, and
trial stretched through eighty-four days in court over the course
of six months. Several participants in the conspiracy, including
Roberts, O’Neal, and Leshner, turned on their associates and
testified for the prosecution. The defendants did not testify but
instead relied on cross-examination, character witnesses, and
expert testimony to present the case for the defense.
Scarfo’s, Pelullo’s, and William Maxwell’s defenses
hinged on the proposition that they had simply been engaged
in standard, run-of-the-mill business practices. John Maxwell,
for his part, claimed he had been in the dark as to the others’
23
malfeasance. The three attorney defendants – McCarthy,
Adler, and Manno – blamed their clients and said they had been
unaware of the criminal conduct.
The government sought to rebut those narratives, telling
jurors: “Is this how legitimate businessmen conduct
themselves? The answer to that is overwhelmingly no.
Legitimate businessmen don’t lie, they don’t cheat, they don’t
steal.” (JAC at 12687; accord JAC at 12504.) The government
also pointed to the mob connections behind the entire
operation, explaining to the jury how organized crime works
and connecting LCN, and Scarfo’s and Pelullo’s roles within
it, to the FirstPlus scheme. The District Court repeatedly made
clear to the jurors, however, that they could consider that
evidence only as it may show that Scarfo and Pelullo (and not
any of the other defendants) were linked to organized crime,
and only for the purpose of determining their motives and the
modus operandi of the scheme.
In mid-June 2014, the jury began to deliberate. The
Court delivered extensive instructions after hearing objections
from the parties. The verdict form asked the jury to reach a
unanimous finding of guilty or not guilty beyond a reasonable
doubt on each of the charges, as well as to make specific
findings as to whether the government had proven each of the
RICO predicate acts as to each of the defendants.
Given the length of the trial, perhaps it was inevitable
that some juror issues would arise. Even before deliberations
started, the Court excused a juror who expressed fears that her
and her family’s identities would be revealed to the defendants.
An alternate was seated in her stead. And after the jury had
been deliberating for a week, another juror was excused
24
because she had prepaid vacation plans. Rather than
proceeding with an eleven-member jury, the parties agreed to
have the Court substitute an alternate juror and instruct the
jurors to start their deliberations anew.
The Court also fielded a complaint from a juror, who
said that other members of the jury were being intransigent in
discussions, and another complaint from an alternate, who told
the Court that he had witnessed jurors discussing the case
outside of the jury room, in violation of the Court’s
instructions. In each case, the Court inquired into the concerns,
informed the parties, and gave them an opportunity to suggest
how to proceed. Both times, the Court ultimately chose to
allow the jurors to continue their deliberations.
The jury reached its verdict on July 3. It convicted
Scarfo, Pelullo, and the Maxwell brothers on virtually all
charges – though the Maxwells were acquitted of the bank
fraud and false statements conspiracies13 – and found that the
government had proven each of the charged racketeering
predicate acts that the Court had sent to the jury (which, for
some of the defendants, was fewer than the eight predicates
listed in the indictment). McCarthy, Adler, and Manno,
however, were acquitted. The District Court then held separate
forfeiture proceedings, at the end of which the jury found that
the proceeds from the fraudulent scheme, including the specific
property the government had sought – the airplane, yacht,
13
While the jury verdict form did not list either John or
William as defendants under those counts, they were indicted
for those offenses and are listed on the District Court docket as
“acquitted” of those charges.
25
Bentley, and jewelry, along with FirstPlus stock certificates,
the contents of bank accounts, and several thousand dollars in
cash – were all forfeit.
H. Post-Trial Proceedings and Sentencing
A blizzard of post-trial motions followed, including
several attempts to secure new trials, all of which were rejected.
Eventually, the District Court told the Defendants to stop filing
motions, and it moved on to the sentencing phase.
It sentenced both Scarfo and Pelullo to 360 months’
imprisonment, William Maxwell to 240 months, and John to
120 months. As relevant here, the Court calculated the
sentencing ranges after finding that the Defendants had caused
a loss of more than $14 million – the value FirstPlus lost over
the course of the scheme – and had harmed more than 1,000
victims – reflecting the number of shareholders whose
investments had been rendered worthless.
The District Court also ordered the Defendants to pay
more than $14 million in restitution and held them jointly and
severally liable for a $12 million forfeiture order for the
proceeds of their criminal activities. The forfeiture ruling also
transferred to the United States title to all the items the
Defendants had purchased with ill-gotten payments the jury
found were forfeitable.
I. Appeals
The Defendants each timely appealed, and we
26
consolidated their appeals. 14 In August 2017, however, we
granted Pelullo’s request to remand his case for the District
Court to address his motion for a new trial based on his claim
that one of his attorneys labored under an undisclosed conflict
of interest. Following briefing and an evidentiary hearing, the
District Court denied Pelullo’s motion in February 2019. He
appealed that ruling, and we consolidated that appeal with the
others.
Before us, the parties completed a supplemental round
of briefing on Pelullo’s claim regarding a federal investigation
and indictment of O’Neal for separate and unrelated
wrongdoing. They also submitted letters and briefing
addressing the effect of certain Supreme Court decisions that
issued while these appeals were pending.
The Defendants’ appeals raise some two dozen issues,
depending on how you count them, across five phases of the
prosecution: (1) the government’s investigation, (2) pretrial
proceedings, (3) trial, (4) sentencing, and (5) post-trial issues
concerning the government’s compliance with its disclosure
obligations.
III. INVESTIGATION ISSUES
Pelullo makes two claims of error arising out of the
government’s investigation. First, he says that the government
14
All record citations, except where otherwise
indicated, are to the combined District Court docket in No. 1-
11-cr-0740. All citations to the docket in this appeal are to the
docket in No. 15-2826.
27
violated his Fourth Amendment rights by tracking cell site
location information from his cellphones without obtaining a
warrant. Second, he criticizes the government’s procedures for
processing communications intercepted from wiretapped
phones and for reviewing potentially privileged documents
seized from his attorneys’ offices. Neither claim entitles him
to relief.
A. Collection of Pelullo’s Cell Site Location
Information15
The Stored Communications Act (“SCA”) allows
government investigators to collect suspects’ cell site location
information (“CSLI”).16 18 U.S.C. § 2703(c). Investigators
can obtain a court order to that end by submitting “specific and
articulable facts showing that there are reasonable grounds to
believe that the [data] are relevant and material to an ongoing
criminal investigation.” Id. § 2703(d). In 2007 and 2008,
prosecutors in this case repeatedly sought authorization to gain
15
We review a “denial of a motion to suppress for clear
error as to the underlying factual findings and exercise plenary
review over its application of the law to those facts.” United
States v. Burnett, 773 F.3d 122, 130 (3d Cir. 2014).
16
“CSLI is a type of metadata that is generated every
time a user’s cell phone connects to the nearest antenna. The
user’s cell phone service provider retains a time-stamped
record identifying the particular antenna to which the phone
connected.” United States v. Goldstein, 914 F.3d 200, 202 (3d
Cir. 2019). “Because most people constantly carry and
frequently use their cell phones, CSLI can provide a detailed
log of an individual’s movements over a period of time.” Id.28
access to CSLI for Pelullo’s and Scarfo’s phones. 17 The
District Court approved the requests, authorizing the collection
from Pelullo’s cellphone provider of nine months of historical
cell site data, going as far back as September 2006, and eleven
months of prospective data, through May 2008.18
As trial approached, Pelullo moved to suppress that
evidence based on the duration of the tracking and the
government’s failure to show probable cause for obtaining the
information. The District Court denied the motion, holding (in
reliance on our precedent at the time) that probable cause was
not required to obtain the CSLI and that, even if it was, the
17
The investigators also obtained authorization to use
two other surveillance methods: pen registers to record
outgoing phone numbers dialed on the phones, 18 U.S.C. §
3127(3), and trap-and-trace devices to record incoming phone
numbers, id. § 3127(4).
18
“Prospective” CSLI means data collected after the
government obtains court permission to acquire it, while
“historical” CSLI describes data already in existence at the
time of the court order. In re Application of U.S. for an Order
Authorizing Installation & Use of a Pen Register & a Caller
Identification Sys., 402 F. Supp. 2d 597, 599 (D. Md. 2005).
The District Court similarly approved the collection of
prospective and historical CSLI from Scarfo’s phone, and
Scarfo moved alongside Pelullo in the District Court to
suppress that data. But he does not, on appeal, challenge the
Court’s denial of his suppression motion, so we are only
concerned with Pelullo’s attack on the government’s gathering
of CSLI from his phones.
29
evidence was nonetheless admissible by virtue of the good-
faith exception.
Pelullo characterizes the government’s applications as
“the most egregious and intrusive surveillance request ever
filed by a United States Attorney.” (SP Opening Br. at 184.)
He argues that the District Court erred in refusing to suppress
the CSLI evidence obtained during the tracking. 19 His
19
Invoking Federal Rule of Appellate Procedure 28(i),
each Defendant purports to adopt all arguments of his “co-
appellants which are applicable to himself.” (SP Opening Br.
at 223; NS Opening Br. at 183; WM Opening Br. at 36; JM
Opening Br. at 49.) Each Defendant then identifies specific
arguments advanced by codefendants that he intends to adopt.
We will recognize their specific adoptions but not the “blanket
request[s]” to adopt, which “fail[] to specify which of the many
issues of [their] codefendants [they] believe[] worthy of our
consideration.” United States v. Fattah, 914 F.3d 112, 146 n.9
(3d Cir. 2019) (citing Fed. R. App. P. 28(a)(5)). “[W]e will
[not] scour the record and make that determination for [them].”
Id.; accord Kost v. Kozakiewicz, 1 F.3d 176, 182 (3d Cir.
1993). Each Defendant has thus abandoned and forfeited any
argument raised by his codefendants that he did not specifically
adopt.
As already noted, Scarfo did not adopt Pelullo’s CSLI
argument. Supra note 18. Both Maxwells, however, did
specifically adopt the argument. Their problem is they lack
standing to pursue that Fourth Amendment claim, as no CSLI
pertaining to them was collected by the government. See
United States v. Cortez-Dutrieville, 743 F.3d 881, 883 (3d Cir.
2014) (defendant seeking “to invoke the Fourth Amendment’s
30
reasoning centers on Carpenter v. United States, in which the
Supreme Court held that the collection of historical CSLI is a
“search” under the Fourth Amendment and that the SCA’s
“reasonable grounds” standard for obtaining a court order
“falls well short” of the probable cause standard the Fourth
Amendment imposes. 138 S. Ct. 2206, 2219-21 (2018).
Nobody disputes that, under Carpenter, acquiring a
defendant’s CSLI without a warrant is an unconstitutional
search. United States v. Goldstein, 914 F.3d 200, 203 (3d Cir.
2019). The question is whether Pelullo was entitled to a
remedy for that violation of his Fourth Amendment rights –
specifically, to have the illegally obtained CSLI suppressed at
trial.
The exclusionary rule is a “judicially created remedy”
by which evidence is suppressed in order to “deter future
Fourth Amendment violations.” Davis v. United States, 564
U.S. 229, 236-38 (2011). We do not reflexively apply it
whenever an unconstitutional search takes place. Goldstein,
914 F.3d at 203. Instead, it is reserved for those cases where
its expected deterrent effect justifies its use. Id. at 203-04.
One set of circumstances in which suppression is not
justified is when the government has an “objectively
reasonable good faith belief in the legality of [its] conduct” at
the time of the search. Id. at 204 (alteration in original). That
good-faith exception to the exclusionary rule is satisfied when
exclusionary rule” must have standing, which is the case when
he has a “legitimate expectation of privacy in the invaded
place” (citation omitted)).
31
the search in question was undertaken in “reli[ance] on a
properly-obtained valid judicial order, a then-valid statute, and
then-binding appellate authority[.]” Id. Here, prosecutors
obtained CSLI pursuant to a court order following the SCA’s
procedures, and, in 2007 and 2008, no binding precedent
required them to do more. On the contrary, that was standard
procedure at the time. See id.; United States v. Curtis, 901 F.3d
846, 849 (7th Cir. 2018); United States v. Joyner, 899 F.3d
1199, 1205 (11th Cir. 2018). Because we do not expect the
government to have anticipated the “new rule” announced a
decade later in Carpenter, its reliance on the SCA was
reasonable, and so the good-faith exception applies to its
acquisition of CSLI data without a warrant. Goldstein, 914
F.3d at 201, 204-05.
Pelullo argues against that conclusion, saying that the
government lacked a good- faith basis for seeking prospective
CSLI – particularly over a lengthy time period – without a
warrant. He seeks to cabin Carpenter and Goldstein as
announcing a “new rule” only as to historical CSLI. 20
Tracking his movements in real time, Pelullo says, involved an
“even greater intrusion into [his] privacy, for a far longer
period of time[,]” and so the government should have known
that it needed a warrant even prior to Carpenter. (SP Opening
Br. at 189.)
Yet Pelullo cites no pre-Carpenter authority from
appellate courts that would have put the government on notice
that seeking prospective CSLI required doing more than
20
For the distinction between prospective and historical
CSLI, see supra note 18.
32
satisfying the SCA’s requirements.21 He cannot even show a
consensus among district courts: at the time the orders at issue
here were signed, courts had reached differing conclusions on
whether officers seeking CSLI needed to show probable cause
and get a warrant, and they were still grappling with the Fourth
Amendment’s application to both historical and prospective
CSLI. See, e.g., In re Applications of U.S. for Orders Pursuant
to Title 18, U.S. Code Section 2703(d), 509 F. Supp. 2d 76, 78-
79, 78 n.4 (D. Mass. 2007) (noting a “disagreement among
courts” and collecting cases that granted applications under the
SCA standard and those that instead required a showing of
probable cause). 22 Neither we nor the Supreme Court had
addressed the issue. We did weigh in a few years after the
searches here took place, in In re Application of the U.S. for an
Order Directing a Provider of Electronic Communication
21
After argument, Pelullo brought to our attention
Leaders of a Beautiful Struggle v. Baltimore Police
Department, 2 F.4th 330 (4th Cir. 2021) (en banc), in which
the Fourth Circuit extended Carpenter to new aerial
surveillance technology and enjoined the City of Baltimore’s
use of it. Setting aside that the case does not deal with CSLI,
it does not affect our analysis of the state of the law before the
Supreme Court held in Carpenter that collecting historical
CSLI constituted a search.
22
Some of those cases held that prospective CSLI was
not authorized by the SCA. But even if the data collection here
violated the SCA, “suppression is not a remedy for a violation
of the [SCA]” and is only appropriate if “cell site location data
was obtained … in violation of the Fourth Amendment.”
United States v. Guerrero, 768 F.3d 351, 358 (5th Cir. 2014).
33
Service to Disclose Records to the Government, 620 F.3d 304,
312-13 (3d Cir. 2010), but that was only to decide that, for
Fourth Amendment purposes, acquiring historical CSLI was
not a search, a holding later abrogated by Carpenter. In sum,
then, the officers lacked clear guidance from any caselaw,
much less binding precedent, that would have put them on
notice that obtaining prospective CSLI would require
compliance with the Fourth Amendment.
Undeterred, Pelullo highlights language in In re
Application noting that CSLI could “be used to allow the
inference of present, or even future, location” and thus
resembles a tracking device. Id. He also points out that the
D.C. Circuit held, prior to Carpenter, that GPS tracking
requires a warrant. United States v. Maynard, 615 F.3d 544,
563-64 (D.C. Cir. 2010). Based on those and other decisions,
he says that, even before Carpenter, the heightened threat to
privacy posed by prospective CSLI should have been evident
to the officers.
Setting aside that the GPS data considered by the D.C.
Circuit reveals a person’s movements more precisely than does
CSLI, which logs the suspect’s general area, “only binding
appellate precedent” “at the time of the search” is relevant to
the good-faith exception. Goldstein, 914 F.3d at 205. While
conducting this investigation, prosecutors dealt with an
unsettled area of law but relied in good faith on what was
available to them – the plain text of the SCA and the court
order they obtained in compliance with that Act. Given those
circumstances, excluding the CSLI would not have “serve[d]
any deterrent purpose[,]” id. at 204, and the District Court did
not err in refusing to suppress the evidence.
34
Pelullo nonetheless insists that, even under the law as it
then existed, the CSLI should have been suppressed because
the government, in its applications for the court orders,
misrepresented the technological capabilities of the equipment
used to collect information from Pelullo’s phone and falsely
claimed that the phone had a connection to New Jersey.23 He
cites the principle that evidence must be suppressed “if the
magistrate or judge in issuing a warrant was misled by
information in an affidavit that the affiant knew was false or
would have known was false except for his reckless disregard
of the truth.” United States v. Leon, 468 U.S. 897, 923 (1984).
His claim that the government made misrepresentations
in those applications fails, however, because he did not first
raise it before the District Court. Federal Rule of Criminal
Procedure 12 requires that a request to suppress evidence “be
raised by pretrial motion[.]” Fed. R. Crim. P. 12(b)(3)(C). As
a result, a suppression argument raised for the first time on
appeal is forfeited, and we do not consider it even under Rule
52(b)’s plain-error standard. United States v. Rose, 538 F.3d
175, 182-84 (3d Cir. 2008). Pelullo offers no explanation for
why he did not object in the District Court to the alleged
23
Specifically, Pelullo argues that the government
misrepresented both that it lacked the capability to collect
outgoing phone numbers dialed on his cellphones using a pen
register without also collecting dialed “content” information,
such as bank account numbers and Social Security numbers,
and that it was unable to obtain precise “pin-point” location
information for his phones using CSLI and could only ascertain
the larger “sector” in which the phones were located. (SP
Opening Br. at 195-98.)
35
misrepresentations, so there is no “good cause” to excuse his
failure to do so. 24 Id. at 184-85.
Even if Pelullo had not forfeited that suppression
argument, his challenge to the evidence would prove fruitless.
The government only introduced a small quantity of CSLI at
trial. And what it did rely on merely served to corroborate
other evidence of Pelullo’s whereabouts. For example,
multiple witnesses testified that Pelullo was in Dallas during
the takeover of FirstPlus, and, as a further example, visitor logs
and security footage showed that Pelullo repeatedly visited
Scarfo’s father in prison in Atlanta. Any alleged error in the
admission of the CSLI was “rendered harmless” “in light of all
of the other evidence” at trial.25 United States v. Perez, 280
F.3d 318, 338 (3d Cir. 2002).
24
It is true that Pelullo joined Scarfo’s challenge
regarding the duration of the tracking and the lack of probable
cause. But neither defendant raised the misrepresentation issue
noted here, and accordingly it is forfeited. See United States v.
Joseph, 730 F.3d 336, 342 (3d Cir. 2013) (holding that a
suppression argument in the district court must match the
argument in the court of appeals to be preserved).
25
Pelullo also argues that improprieties in the collection
of the CSLI led to his conviction because they served as one of
the bases for the government’s requests to conduct wiretaps.
That, too, is not a basis for relief, since Pelullo makes no effort
to show that the wiretap applications would have been devoid
of probable cause without the CSLI. See Franks v. Delaware,
438 U.S. 154, 155-56 (1978) (holding that, when a defendant
establishes the falsity of a statement in an affidavit used to
36
B. Filter Teams26
Because federal agents intercepted and seized materials
covered by attorney-client privilege, the government
established filter teams to keep that information out of
procure a warrant and when “the affidavit’s remaining content
is insufficient to establish probable cause, the search warrant
must be voided and the fruits of the search excluded”).
26
We exercise de novo review over specific legal issues
underlying the claim of attorney-client privilege and review
factual determinations for clear error. In re Impounded, 241
F.3d 308, 312 (3d Cir. 2001). We review for abuse of
discretion a district court’s judgment that the crime-fraud
exception applies. Id. at 318. We review pre-indictment
procedures used by the District Court for abuse of discretion.
See In re Grand Jury Subpoena, 223 F.3d 213, 219 (3d Cir.
2000) (finding no abuse of discretion in district court “denying
Appellant and/or his attorney access to this information to
protect grand jury secrecy”).
Preserved Fifth Amendment claims are typically
reviewed for harmless error, United States v. Toliver, 330 F.3d
607, 613 (3d Cir. 2003), while infringements on the Sixth
Amendment right to counsel are generally structural errors that
require automatic reversal, United States v. Gonzalez-Lopez,
548 U.S. 140, 150 (2006). With regard to Pelullo’s challenges
to ex parte proceedings, however, we need not grapple with the
varying standards of review because those claims fail under
any standard, as he identifies no error. We analyze his
separation-of-powers claim under the harmless-error standard,
as discussed in greater detail herein.
37
prosecutors’ hands. Pelullo challenges the procedures
employed by the filter teams and the District Court’s attorney-
client privilege rulings as deprivations of his Fifth Amendment
right to due process and his Sixth Amendment right to counsel,
and as violative of the separation of powers.27 As a remedy for
those alleged errors, he claims he is entitled to a new trial. His
arguments fail.
1. Background
In August 2007, approximately four years before
Pelullo was indicted, the District Court entered an order
permitting the government to intercept his cellphone
communications, having found probable cause that he and
others were committing criminal offenses and using
communications with counsel to further those offenses. While
wiretapping Pelullo’s phone, federal agents intercepted calls
between Pelullo and his attorneys.
Knowing that some of those communications could be
privileged, the government deployed a “Wiretap Filter Team”
between federal investigators and the prosecution team, to
examine the communications and sort them into three
categories before turning them over to the prosecutors: (1)
communications protected by the attorney-client privilege; (2)
communications that would be privileged but for the crime-
fraud exception, which excludes from the scope of the
27
John and William Maxwell say they adopt Pelullo’s
arguments on these issues. That adoption, however, is
ineffective, because Pelullo’s briefing focuses specifically on
alleged intrusions into his own attorney-client privilege, an
issue that has no relevance to the Maxwells.
38
attorney-client privilege any communications made “in
furtherance of a future crime or fraud”; and (3) unprivileged
communications. United States v. Zolin, 491 U.S. 554, 563
(1989). Once the Wiretap Filter Team sorted the information,
it sought court approval to share with the prosecution team
unprivileged communications and communications falling
under the crime-fraud exception.
The Wiretap Filter Team was headed by Assistant U.S.
Attorney (“AUSA”) Melissa Jampol. She and her team
reviewed wire and text communications between Pelullo and
his attorneys, including, among others, David Adler, Gary
McCarthy, and Donald Manno. Federal agent Kevin Moyer,
who engaged as well in the surveillance of Scarfo and others
for a brief period, was also assigned to the Wiretap Filter Team.
In connection with his surveillance responsibilities, Moyer
interacted with members of the prosecution team.
During the duration of the wiretap, which was from
August 2007 through January 2008, Jampol submitted five
sealed ex parte motions to the District Court seeking to disclose
communications to the prosecution team. The District Court
granted each of those motions, authorizing disclosure of
selected intercepted communications to the prosecution team.
The Wiretap Filter Team’s memoranda of law, including
supporting affidavits and related papers, remained under seal
until after Pelullo’s indictment was unsealed. Following the
indictment’s unsealing, all the intercepted communications,
including those not yet disclosed to the prosecution team, were
provided to Pelullo’s counsel, giving him an opportunity to
challenge any of the communications as privileged, prior to
their potential use at trial. Pelullo’s counsel moved to exclude
the intercepted communications en masse, without identifying
39
any particular communication claimed to be privileged. The
District Court denied that motion.
Roughly nine months after the entry of the order, law
enforcement officials executed search warrants at the offices
of both Manno’s solo law practice and McCarthy’s law firm.
Two more filter teams were established to review and sort out
privileged materials seized from those offices: the “Manno
Filter Team” and the “McCarthy Filter Team.”
AUSA Matthew Smith and federal agent Michael
O’Brien formed the Manno Filter Team. O’Brien performed
an initial review of materials seized from Manno’s law office,
trying to make sure those items fell within the scope of the
search warrant, and Smith then made the privilege
determinations. Manno v. Christie, 2008 WL 4058016, at *5
(D.N.J. Aug. 22, 2008). If Smith determined that items were
not privileged, he turned them over to the prosecution team,
without going through the District Court first. Id. In contrast,
if he thought that certain items might be privileged, he then
determined whether an exception to the privilege, such as the
crime-fraud exception, applied. Id. When such an exception
did apply, Smith would “‘meet and confer’ with Manno or any
… individual who may have a claim of privilege in an attempt
to work out a resolution.” Id. Then, if that was unsuccessful
in resolving any concerns, Smith applied to the District Court
for a privilege determination before disclosing anything to the
prosecution team. Id.The McCarthy Filter Team, led by Department of
Justice attorney Cynthia Torg, followed similar procedures. It
cataloged the materials seized from McCarthy’s law office and
substantively evaluated them. Because the materials included
40
multiple parties and transactions, the team worked with
McCarthy’s counsel to identify items covered by the attorney-
client privilege and the names of any of McCarthy’s clients
who may have held the corresponding privilege as to those
items. Any items identified as “potentially privileged” were
segregated, and in February 2013, nearly one and a half years
after Pelullo’s indictment, his counsel in this case was provided
copies of those items to confirm if either Pelullo or Seven Hills
claimed that privilege. The McCarthy Filter Team then sought
to work with Pelullo’s counsel to resolve privilege disputes and
reduce the volume of contested documents that the District
Court needed to review.
2. Challenges to Filter Team Procedures
Pelullo first challenges the propriety of the procedures
employed by the Wiretap Filter Team and Manno Filter Team,
saying they violated his Fifth and Sixth Amendment rights. He
asserts it was improper for Agent Moyer to be on both the
Wiretap Filter Team and an investigative team that had regular
contact with the prosecution. He claims that error necessarily
led to privileged information making its way from the Wiretap
Filter Team to the prosecution. Additionally, Pelullo contends
the Manno Filter Team’s attorney-client privilege
determinations were improperly made by Agent O’Brien, a
non-attorney.
While rare, governmental intrusion into an attorney-
client relationship has occasionally risen to the level of
“outrageous government conduct” violative of the Fifth
41
Amendment’s Due Process Clause.28 United States v. Voigt,
89 F.3d 1050, 1066 (3d Cir. 1996). We have exercised
“scrupulous restraint” before declaring government action so
“outrageous” as to “shock[] … the universal sense of justice[.]”
Id. at 1065 (citation omitted). We thus require defendants to
show the government knew of and deliberately intruded into
the attorney-client relationship, resulting in “actual and
substantial prejudice.” Id. at 1066-67. But nowhere does
Pelullo claim the government’s conduct “amount[ed] to an
abuse of official power that ‘shocks the conscience’” or
otherwise explain how his due process rights were violated.
Fagan v. City of Vineland, 22 F.3d 1296, 1303 (3d Cir. 1994)
(citing Collins v. City of Harker Heights, 503 U.S. 115, 126
(1992)). He directs us to “no document, no telephone call,
nothing that was turned over to the prosecution team that in any
way has been used against [him] improperly[.]” (JAB at 2225.)
Although Agent Moyer’s presence on both a surveillance team
28
Common-law attorney-client privilege, which Pelullo
asserts, has been described as overlapping with the Fifth
Amendment protection against self-incrimination. See Fisher
v. United States, 425 U.S. 391, 405 (1976) (noting the overlap
between the right against self-incrimination and the attorney
client privilege); In re Foster, 188 F.3d 1259, 1271 (10th Cir.
1999) (“Under Fisher, [the attorney-client] privilege
effectively incorporates a client’s Fifth Amendment right; it
prevents the court from forcing [the attorney] to produce
documents given it by [the client] in seeking legal advice if the
Amendment would bar the court from forcing [the client]
himself to produce those documents.”). Pelullo, however, only
argues a Fifth Amendment due process violation, and he does
not invoke his right against self-incrimination.
42
and a filter team may have run afoul of Department of Justice
procedures, 29 that alone is not enough to establish a
constitutional violation.
With respect to the Manno Filter Team, Pelullo is not
quite accurate when he says that Agent O’Brien, a non-
attorney, performed the initial privilege determinations.
O’Brien did screen the materials in the first instance to decide
what fell within the scope of the warrant. Manno, 2008 WL
4058016, at *5. The initial privilege review, however, was
performed by AUSA Smith. Id. And even if that were not the
case, Pelullo does not present an argument that O’Brien being
an initial screener would “shock the conscience.”
Finally, in a conclusory fashion, Pelullo also asserts that
the errors he alleges are also all in violation of the Sixth
Amendment. But the Sixth Amendment does not attach before
the indictment. See McNeil v. Wisconsin, 501 U.S. 171, 175
(1991); United States v. Kennedy, 225 F.3d 1187, 1194 (10th
Cir. 2000) (“Government intrusions into pre-indictment
attorney-client relationships do not implicate the Sixth
Amendment.”).
Pelullo fails to identify any constitutional deficiencies
in the procedures of the filter teams, and we discern no error.
29
A Department of Justice manual provides that
“‘privilege team[s]’ should … consist[] of agents and lawyers
not involved in the underlying investigation.” U.S. Dep’t of
Justice, Justice Manual § 9-13.420 (2021).
43
3. Challenges to Ex Parte Proceedings
Next, Pelullo challenges the ex parte proceedings held
in conjunction with the filter teams, saying they violated his
Fifth Amendment due process rights, his Sixth Amendment
right to counsel, and separation of powers principles. Again,
he comes up short. The use of filter teams is an acceptable
method of protecting constitutional privileges. Moreover,
Pelullo has not identified any privileged materials that were
improperly shared with the prosecution, nor has he otherwise
attempted to demonstrate prejudice.
The use of filter teams in conjunction with ex parte
proceedings is widely accepted. See, e.g., In re Search of Elec.
Commc’ns, 802 F.3d 516, 530 (3d Cir. 2015) (“[T]he use of a
‘taint team’ to review for privileged documents [is] a common
tool employed by the Government.”); In re Grand Jury
Subpoenas, 454 F.3d 511, 522 (6th Cir. 2006) (explaining that
when “potentially-privileged documents are already in the
government's possession, … the use of the taint team to sift the
wheat from the chaff constitutes an action respectful of, rather
than injurious to, the protection of privilege”); United States v.
Avenatti, 559 F. Supp. 3d 274, 282 (S.D.N.Y. 2021) (“[T]he
use of a filter team is a common procedure in this District and
has been deemed adequate in numerous cases to protect
attorney-client communications.” (citation and internal
quotation marks omitted)). Contrary to Pelullo’s suggestion,
he had no pre-indictment Sixth Amendment rights, nor did he
have a Fifth Amendment due process right to notice of the ex
parte proceedings. Indeed, his surveillance was consistent with
the Wiretap Act, which requires courts to seal all government
applications for wiretaps and any resulting orders. 18 U.S.C.
§ 2518(8)(a)-(b). That sealing provision was established “to
44
protect the confidentiality of the government’s
investigation[,]” United States v. Florea, 541 F.2d 568, 575
(6th Cir. 1976), which the sealing did here until the appropriate
time. Although the Act entitles the subject of the wiretap to
notice and an inventory of the intercepted communications
within a reasonable time, such notice may be postponed
pursuant to an ex parte showing of good cause. 18 U.S.C.
§ 2518(8)(d).
Good cause is not a high bar, and an ongoing criminal
investigation will typically justify delayed notice of the
wiretap. E.g., United States v. John, 508 F.2d 1134, 1139 (8th
Cir. 1975); United States v. Manfredi, 488 F.2d 588, 602 (2d
Cir. 1973). It did so in this case. The undercover investigation
here continued until the intercepted communications gave the
government probable cause in May 2008 to search the law
offices of Manno and McCarthy. By executing those searches
pursuant to warrants, the government’s investigation could no
longer continue undercover. Pelullo was thus notified about
the existence of the wiretap shortly thereafter.
Pelullo next challenges the procedures employed by the
Manno and McCarthy Filter Teams, arguing they violated
separation-of-powers principles. The Manno and McCarthy
Filter Teams, as detailed above, instituted procedures to ensure
the protection of privileged materials. In challenging those
procedures, Pelullo relies predominantly on a Fourth Circuit
case, In re Search Warrant, 942 F.3d 159 (4th Cir. 2019),
which held comparable conduct unconstitutional. That case,
however, arose in the context of a motion for a temporary
restraining order brought by a law firm to enjoin the use,
without adequate process, of materials that had been seized as
part of a criminal investigation into one of its clients. Id. at
45
164. The Fourth Circuit reversed the district court’s denial of
the motion, ordering that the challenged filter team procedures
be enjoined. Id. at 170.
Pelullo’s argument arises in an entirely different
procedural posture: on post-conviction appeal. The full
applicability of the Fourth Circuit’s precedent is thus open to
question. More importantly, however, Pelullo has not
identified any way in which the process used to screen for
attorney-client privileged material caused him harm. We do
not believe, nor has Pelullo suggested, that the alleged error –
allowing an executive branch employee to make an initial
privilege determination – is structural. See United States v.
Colon-Munoz, 192 F.3d 210, 217 n.9 (1st Cir. 1999) (finding
alleged separation-of-powers violation not structural because it
“involve[d] the structure of the federal government rather than
the structure of the criminal trial process as a reliable means of
determining guilt or innocence”); see also Neder v. United
States, 527 U.S. 1, 8-9 (1999) (structural error is that which
would “deprive defendants of ‘basic protections’ without
which ‘a criminal trial cannot reliably serve its function as a
vehicle for determination of guilt or innocence ... and no
criminal punishment may be regarded as fundamentally fair’”
(citation omitted)).
Thus, we employ harmless-error review, and the answer
to whether there was any error here that caused Pelullo harm is
simple. There was not. Despite having had a full and fair
opportunity to do so, before both the District Court and us,
Pelullo has not pointed to any piece of evidence that was
privileged but improperly provided to the prosecution.
Without reaching the question of whether a constitutional
violation occurred (and without commenting on the
46
advisability of the particular screening methods employed by
the government), it is clear that, even if there were error, there
was no prejudice as a consequence. See United States v.
Schneider, 801 F.3d 186, 200 (3d Cir. 2015) (“An error is
harmless when it is highly probable that it did not prejudice the
outcome.” (citation and internal quotation marks omitted)).
Because Pelullo has not shown that injury resulted from the
filter teams’ review, any error was harmless, and his Fifth and
Sixth Amendment claims fail.
4. Crime-Fraud Exception
Pelullo’s final complaint about the handling of his
attorney-client privilege assertions in the District Court is that
the Court applied the incorrect standard when determining
whether the crime-fraud exception applied to certain
intercepted communications. But it is Pelullo who
misconstrues that exception.
The crime-fraud exception to the attorney-client
privilege limits “the right of a client to assert the privilege …
with respect to pertinent [communications] seized by the
government, when the client is charged with continuing or
planned criminal activity.” In re Impounded Case, 879 F.2d
1211, 1213 (3d Cir. 1989). To invoke the exception, the party
seeking to overcome the privilege must first demonstrate “a
factual basis … to support a good faith belief by a reasonable
person that the [seized] materials may reveal evidence of a
crime or fraud.” Haines v. Liggett Grp. Inc., 975 F.2d 81, 96
(3d Cir. 1992). If that threshold is crossed, the district court
will conduct an in camera review to determine whether the
party advocating the exception has made “a prima facie
showing that (1) the client was committing or intending to
47
commit a fraud or crime, … and (2) the attorney-client
communications were in furtherance of that alleged crime or
fraud[.]” In re Grand Jury Subpoena, 223 F.3d 213, 217 (3d
Cir. 2000) (citations omitted).
Contrary to the just-quoted precedent, Pelullo says that
the crime-fraud exception requires something beyond a prima
facie showing, that some heightened standard governs whether
disclosure to the prosecution is permitted. He is wrong. As
our precedent makes clear, there is no heightened standard
beyond the requisite prima facie showing. Here, the District
Court performed the correct analysis when it determined, based
on the government’s prima facie showing, that Pelullo was
committing crimes and that the communications at issue
included discussion furthering those crimes. The Court’s
conclusion was supported by the filter teams’ evidence of
Pelullo’s criminal activities, the connection between his
attorneys and the purported fraud, and analysis of how
Pelullo’s conversations with attorneys furthered that fraud.
In sum, the showing required to apply the crime-fraud
exception was met by the evidence provided by the filter teams,
and the District Court relied on the appropriate legal standard
in making its determinations. Pelullo has not established any
error based on the government’s use of filter teams.
IV. PRETRIAL ISSUES
The Defendants claim to have identified multiple errors
arising from what happened – and didn’t happen – prior to trial.
First, Pelullo asserts that the District Court failed to promptly
set a trial date and so deprived him of a speedy trial. Next,
Pelullo and both Maxwells complain about the District Court’s
48
grant of the government’s request to introduce evidence of
Scarfo’s and Pelullo’s ties to organized crime, and the
Maxwells insist that the Court should have severed their trial
from that of their codefendants. None of those arguments is
persuasive.
A. Speedy Trial Act Claim30
Although Pelullo was arrested in November 2011, his
trial did not occur until more than two years later. He objects
to the length of that delay, blaming the government for causing
the holdup and faulting the District Court for waiting too long
to set a trial date. He asks us to reverse his conviction and order
dismissal of the charges with prejudice. But because the
District Court properly ordered a continuance in response to
the complex nature of the case, and because it scheduled trial
once it made sense to do so, Pelullo’s arguments fail.
To “assure a speedy trial” for all defendants, the Speedy
Trial Act sets timing deadlines for the stages of a criminal
prosecution. 18 U.S.C. § 3161(a). A defendant must be
indicted within thirty days of his arrest, and he must be tried
within seventy days of the later of his indictment or initial
appearance. Id. § 3161(b), (c)(1). The Speedy Trial Act
generally insists on strict conformity with its deadlines:
30
We exercise plenary review of a district court’s
interpretation of the Speedy Trial Act and review factual
conclusions for clear error. United States v. Lattany, 982 F.2d
866, 870 (3d Cir. 1992). We review for abuse of discretion a
district court’s grant of a continuance after a proper application
of the Act to established facts. Id.49
charges “shall be dismissed” if a defendant is not afforded a
trial on time. Id. § 3162(a)(2). Nonetheless, those deadlines
can be tolled for good cause. Id. § 3161(h); accord United
States v. Adams, 36 F.4th 137, 144-45 (3d Cir. 2022). Delay is
allowed for the duration of a continuance granted by the district
court “on the basis … that the ends of justice [are better] served
by taking such action [and that doing so] outweigh[s] the best
interest of the public and the defendant in a speedy trial.” 18
U.S.C. § 3161(h)(7)(A). If a continuance is improper or the
court does not justify its findings on the record, however, the
clock continues to run. Id.; Zedner v. United States, 547 U.S.
489, 508 (2006).
Case complexity is an acceptable reason for tolling
Speedy Trial Act deadlines, 18 U.S.C. § 3161(h)(7)(B)(ii), and
this case was certainly complex. It involved thirteen
codefendants, dozens of charges, “approximately 1,000,000
pages of information[,]” and “voluminous” amounts of
discoverable material, including seven months of wire taps,
hundreds of phone call recordings, items seized from seventeen
locations, and data from sixty computers. (Government’s
Supplemental Appendix (“GSA”) at 407D.) In light of all that,
the parties wisely acceded to a Complex Case Order (“CCO”),
which the District Court entered in December 2011, just over
a month after the defendants were indicted and well before the
seventy-day deadline. The District Court found that the
defendants would need “considerable time” to look over the
documents and craft their defenses and pretrial motions. (GSA
at 407E.) Specifically citing “the nature of the prosecution, its
complexity[,] and the number of defendants,” the Court
designated the case as complex, determined that it would be
“unreasonable to expect adequate preparation” within the
seventy-day window, and found that “the ends of justice served
50
by granting the continuance outweigh[ed] the best interests of
the public and the defendants in a speedy trial.” 31 (GSA at
407F (citing 18 U.S.C. § 3161(h)(7)(A), (B)(ii)).) It entered an
indefinite continuance without a set end date, with trial to take
place on a date “to be determined[.]” (GSA at 407F.)
Like all the other parties, Pelullo stipulated to entry of
the CCO, and he never advanced a speedy-trial argument or
asked the District Court to set a trial date prior to seeking
dismissal of the charges on Speedy Trial Act grounds in March
2013 – roughly sixteen months after the CCO was entered. Yet
he now takes issue with the open-ended nature of the
continuance, saying it failed to incentivize the parties to move
quickly toward trial and enabled the government to delay
providing discovery.
In United States v. Lattany, 982 F.2d 866, 877, 881 (3d
Cir. 1992), we authorized district courts to enter open-ended
continuances to serve the ends of justice as long as they are
“not permitted to continue for an unreasonably long period of
time” and are supported by on-the-record factual findings.
31
The District Court also held that the defendants had
waived their “rights under the Speedy Trial Act[.]” (GSA at
407F.) That was not correct: while a defendant whose rights
have already been violated but who fails to raise the issue prior
to pleading guilty or going to trial loses his “right to
dismissal[,]” 18 U.S.C. § 3162(a)(2), “a defendant may not
prospectively waive the application of the Act.” Zedner v.
United States, 547 U.S. 489, 503 (2006). Because the District
Court’s decision to grant a continuance was otherwise proper,
however, that error does not alter our analysis.
51
While a continuance must be reasonable in length, defendants
are not “free to abuse the system by requesting [ends-of-
justice] continuances and then argu[ing] that their convictions
should be vacated because the continuances they acquiesced in
were granted.” Id. at 883; accord United States v. Fields, 39
F.3d 439, 443 (3d Cir. 1994) (Alito, J.) (“The defendant’s
arguments are disturbing because he would have us order the
dismissal of his indictment based on continuances that his own
attorney sought.”).
The continuance here was appropriate. Pelullo
explicitly conceded in the District Court “that the complex
designation [was] factually supported” (JAB at 1933), and he
does not identify any clear error in the District Court’s findings.
As the extensive motions practice in which the parties engaged
and the duration of the trial both confirm, the number of
defendants, factual complexities of the case, and sheer volume
of discovery all required difficult and time-consuming pretrial
preparation by the parties.32 Indeed, Pelullo himself joined in
a request to delay for six weeks the start of trial following jury
selection, even though the District Court proposed beginning
trial immediately, and even though Pelullo had recently begun
arguing that his rights under the Speedy Trial Act were being
violated. Cf. United States v. Jernigan, 20 F.3d 621, 622 n.5
32
Any blame for delay in affording the defendants
discovery, meanwhile, appears to be attributable to third-party
vendors who were overwhelmed by the scale of the discovery
demands. For its part, the District Court provided Pelullo and
Scarfo access to computer systems inside their detention
facility so they could review the discovery and discuss it with
their attorneys.
52
(5th Cir. 1994) (defendant’s speedy trial claim “is stripped of
all force by the fact that he sought … additional continuances
after the complained-of delay” (emphasis omitted)).
The District Court certainly did not abuse its discretion
in authorizing the continuance it did. As in Lattany, the
continuance was granted before the end of the Speedy Trial
Act’s seventy-day window; the District Court
“contemporaneously and specifically justified the continuance
by a finding that it was necessary for [the defendants] to
adequately prepare [their] defense,” and further justified it by
reference to the “numerous charges” in the case; the Court
“continually attempt[ed] to accommodate [Pelullo] throughout
the pretrial stage”; Pelullo “acquiesced in the motion[] for [a]
continuance[]”; and, beyond all dispute, the case was complex.
Lattany, 982 F.2d at 878, 883; see also Fields, 39 F.3d at 444(“[A]n ‘ends of justice’ continuance may be granted for the
purpose of giving counsel additional time to prepare motions
in ‘unusual’ or ‘complex’ cases.”). Allowing discovery and
pretrial motions to play out and then turning to trial, as the
District Court did, was a reasonable approach that conformed
with the requirements of the Speedy Trial Act.
Pelullo nevertheless notes that the Act requires a court
to schedule a date for trial “at the earliest practicable time[,]”
18 U.S.C. § 3161(a), and objects that the District Court did not
set a trial date until a year and a half after the indictment. But
the scheduling of a trial date is a means to an end: the court
“shall” set a trial date “so as to assure a speedy trial.” Id.(emphasis added). All the District Court needed to do was set
a date as soon as doing so was “practicable.” Id. It ably met
those obligations here. Once the end was reasonably within
sight in 2013, the Court scheduled a date for trial. Given the
53
reasonableness of the continuance, the District Court did not
err in waiting to schedule the trial, and Pelullo has failed to
demonstrate a violation of the Speedy Trial Act.33
B. Admission of La Cosa Nostra Evidence and
Denial of the Maxwells’ Motion for Severance
The Defendants contend that the District Court erred in
admitting evidence of Scarfo’s and Pelullo’s ties to La Cosa
Nostra pursuant to Federal Rules of Evidence 403 and 404(b)
and that, accordingly, they are entitled to new trials. 34 The
Maxwells further contend that the District Court abused its
33
Because the District Court complied with § 3161(a),
we need not address whether a violation of that provision
automatically requires dismissal or whether a defendant who
was not given a trial date “at the earliest practicable time” must
establish that he was prejudiced by that delay.
34
Pelullo and John Maxwell primarily briefed the
admission of organized crime evidence, and both specifically
adopt each other’s arguments. William Maxwell did not
separately brief the admission of organized crime evidence, but
he specifically adopted the arguments of Pelullo and John, so
the issue belongs to all three of those Defendants. While
Scarfo did not specifically adopt the other Defendants’
arguments and thus forfeited them, see supra note 19, we
nonetheless refer to the arguments in this section as belonging
to “the Defendants” for the sake of simplicity.
William provided only limited briefing on severance,
but, again, he specifically joined John’s arguments with respect
to that issue. Accordingly, we attribute any arguments made
by John on severance to William as well.
54
discretion by denying their motion to sever their trial from that
of Scarfo and Pelullo since the evidence of mob ties, even if
properly admitted, prejudiced their defenses. We reject each
of those contentions.
1. Admission of LCN Evidence35
Prior to trial, the government moved for permission to
introduce evidence of Scarfo’s and Pelullo’s association with
organized crime, including an explanation of the hierarchy of
LCN and the custom of paying superiors within the
organization. The government presented two alternative
arguments in support of its request: first, the evidence was
intrinsic to the charged offenses; and second, even if not
intrinsic, the evidence was admissible as evidence of prior bad
acts pursuant to Federal Rule of Evidence 404(b). Over the
Defendants’ objections, the District Court permitted
introduction of the LCN evidence as “classic 404(b)
evidence.”36 (JAB at 2343.) It reasoned that the evidence was
35
We review decisions to admit evidence for abuse of
discretion, and such discretion is construed especially broadly
in the context of Rule 403. United States v. Moreno, 727 F.3d
255, 262 (3d Cir. 2013) (“In order to justify reversal, a district
court’s analysis and resulting conclusion must be arbitrary or
irrational.” (citation omitted)). “However, to the extent the
District Court’s admission of evidence was based on an
interpretation of the Federal Rules of Evidence, the standard of
review is plenary.” United States v. Bobb, 471 F.3d 491, 497
(3d Cir. 2006).
36
The District Court disagreed with the government’s
55
“relevant because it explain[ed] how and why the takeover
occurred” and was “offered … to show motive and control[.]”
(JAB at 2343.) The Court also decided the evidence was
“sufficiently probative under [Rule] 403 because it …
provide[d] an explanation as to why people would do what they
[allegedly] did in this case,” and that, although the evidence of
mob ties may have been prejudicial, that prejudice did not
“significantly outweigh[] the relevance of the testimony about
the membership in La Cosa Nostra.” (JAB at 2343.)
Consistent with that ruling, Agent Kenneth Terracciano
testified at trial about the hierarchy of LCN, Scarfo’s father’s
involvement in LCN, the attempted murder of Scarfo in 1989,
and Scarfo’s subsequent status with the Lucchese family.
Terracciano did not testify that Scarfo had committed any
crimes on behalf of the Lucchese family and did not even
mention Pelullo. The government instead sought to establish
Pelullo’s allegiance to LCN by introducing evidence of, among
other things, his close relationship with Scarfo and Scarfo’s
father, including during the takeover of FirstPlus, and his
efforts to get Scarfo’s father released from prison.
Throughout the trial, the District Court repeatedly
provided limiting instructions to the jury. Namely, each time
LCN or organized crime was mentioned, the Court informed
the jury that “[t]here [was] no evidence and the government
[did] not allege that any defendants, other than Scarfo and
Pelullo, were associates in any organized crime organization.”
alternative argument that the evidence of LCN ties was
intrinsic to the indicted crimes and hence not subject to Rule
404(b).
56
(JAC at 1750-51; see also JAC at 711-13, 5434-35.) The Court
made clear it was up to the jurors to decide whether Scarfo or
Pelullo “were so associated or whether they made use of,
sought the benefit of or benefited from their association with
La Cosa Nostra, and whether either of them used those
associations to further the unlawful goals of the RICO
enterprise alleged in this case.” (JAC at 1750-51; see also JAC
at 711-13.) The jury was also instructed that none of those
associations could be considered “as proof that … Scarfo and
Pelullo had a bad character or any propensity to commit
crime.” (JAC at 1751; see also JAC at 712-13, 1473.)
Under Federal Rule of Evidence 404(b), evidence of a
defendant’s prior crimes, wrongs, or other acts “is not
admissible to prove a person’s character in order to show that
on a particular occasion the person acted in accordance with
the character” – in other words, it may not be used to show that
a person had a propensity for crime. Fed. R. Evid. 404(b)(1).
Such evidence is admissible, however, “for another purpose,
such as proving motive, opportunity, intent, preparation, plan,
knowledge, identity, absence of mistake, or lack of accident.”
Fed. R. Evid. 404(b)(2). We have explained that 404(b)(2)
evidence is admissible “if it is: (1) offered for a non-propensity
purpose; (2) relevant to that identified purpose; (3) sufficiently
probative under Rule 403 so its probative value is not
[substantially] outweighed by any inherent danger of unfair
prejudice; and (4) accompanied by a limiting instruction, if
requested.” United States v. Garner, 961 F.3d 264, 273 (3d
Cir. 2020) (citation and internal quotation marks omitted). “In
a conspiracy case, evidence of other bad acts, subject always
to the requirements of Rule 403, can be admitted to explain the
background, formation, and development of the illegal
relationship.” United States v. Escobarde Jesus, 187 F.3d 148,
57
169 (1st Cir. 1999); accord United States v. Reifler, 446 F.3d
65, 91-92 (2d Cir. 2006) (“Evidence that a defendant had ties
to organized crime may be admissible in a variety of
circumstances[,]” including to explain “how the illegal
relationship between [co-conspirators] developed[.]” (citation
omitted)).
The Defendants contend that the District Court abused
its discretion by admitting the organized crime evidence. More
specifically, they allege that the evidence was not relevant, was
not offered for a non-propensity purpose, and was unduly
prejudicial. All three arguments lack merit.
First, the District Court correctly deemed the LCN
evidence relevant. Federal Rule of Evidence 402 states
“[i]rrelevant evidence is not admissible.” As the Court noted,
the LCN evidence explained “how and why the takeover [of
FirstPlus] occurred.” (JAB at 2343.) So the evidence was
relevant. And proving motive is a proper purpose for evidence
under Rule 404(b). Virtually everything in this case traces
back to the conspirators’ decision to seize control of the
company, which was motivated at least in part by Pelullo’s and
Scarfo’s LCN obligations. That is most relevant to Pelullo
(and Scarfo), but it is relevant to the Maxwells too. The
Maxwells may have boarded the conspiracy for their own
reasons, but they still got on. The ties to LCN help explain
how and why the railroad was being operated.
In that vein, the evidence shed light on Scarfo’s and
Pelullo’s relationship, explaining why Pelullo was subservient
to Scarfo even though Pelullo was the operational leader of the
58
FirstPlus scheme.37 See United States v. King, 627 F.3d 641,
649 (7th Cir. 2010) (affirming admission of gang evidence that
“helped establish the relationship among [the co-conspirators
and] the rank of those men within the gang,” which “was
central to the government’s theory”). It also explained
Scarfo’s need to pay off the Lucchese crime family. And,
contrary to the Defendants’ arguments, it is immaterial whether
Scarfo and Pelullo also engaged in the conspiracy for personal
reasons – namely, a desire to line their own pockets – in
addition to doing so to meet their LCN obligations. “[T]he law
recognizes that there may be multiple motives for human
behavior[,]” and evidence of other motives does not render
irrelevant the evidence of Scarfo’s and Pelullo’s LCN ties. See
United States v. Technodyne LLC, 753 F.3d 368, 385 (2d Cir.
2014) (citing Anderson v. United States, 417 U.S. 211, 226
(1974) (“A single conspiracy may have several purposes, but
if one of them – whether primary or secondary – be the
violation of a federal law, the conspiracy is unlawful[.]”)).
So, the evidence was offered for, and relevant to, a non-
propensity purpose. Even then, it still had to survive Rule
403’s balancing test. And it did. The District Court said that
37
To only highlight a few examples indicating Pelullo’s
subservience to Scarfo, Pelullo ensured that Scarfo received
$33,000 per month plus expenses through a sham consulting
agreement under which Scarfo did nothing of value, and he
fraudulently obtained a mortgage for Scarfo’s wife. In
addition, evidence indicated that Pelullo was driven by his fear
of not being able to pay Scarfo’s father. (See JAD at 1468
(“[W]hatta we gonna do without that money they’re they’re
[sic] dead. … [M]y uncle is gonna f[***]in’ kill me.”).)
59
it was sure there was some prejudice to Pelullo and Scarfo from
the introduction of the evidence, but it found that the
prejudicial effect did not substantially outweigh the probative
value of the organized crime evidence because that evidence
helped explain why the Defendants did what they did. (JAB at
2343.)
Pelullo argues that the balancing was “insufficient and
substantively improper[,]” but he does not specify what else
the Court should have considered or why the Court’s reasoning
was deficient. (SP Reply Br. at 23-24.) Because the Court
“engage[d] in a Rule 403 balancing and articulate[d] on the
record a rational explanation,” the 403 challenge fails. 38
United States v. Sampson, 980 F.2d 883, 889 (3d Cir. 1992).
The Maxwells make a related prejudice argument. They
contend that, due to the admission of LCN evidence, “Scarfo’s
38
Pelullo makes an additional Rule 403 argument on a
separate piece of evidence. He says the District Court
improperly admitted testimony from FirstPlus secretary David
Roberts that, shortly after the FirstPlus takeover, Pelullo told
him, William Maxwell, and John Maxwell “that if we ever rat,
our wives will be f[***]ed by the N word and our children will
be sold off as prostitutes.” (JAC at 1848.) The Court
determined that the threat was probative in showing that
Pelullo wanted to “drive home the point that he was threatening
harm and he obviously thought that … the listener [would have
understood he] was in grave danger.” (JAB at 2402.) The
Court concluded that any prejudicial effect from the disgusting
phrasing of the threat was outweighed by the relevance of
proving Pelullo’s state of mind. Because the Court conducted
60
proverbial blood spilled all over” them, resulting in a “taint
[that] could not be washed away or otherwise cle[a]nsed.” (JM
Opening Br. at 37.) But the District Court, in addition to
weighing the evidence under Rule 403, provided clear
instructions to the jury that only Scarfo and Pelullo, not any of
the other defendants, were associated with LCN and the
Lucchese family.
Limiting instructions are an appropriate way to ensure
that a jury understands the purpose for which evidence of prior
acts may be considered, and such instructions are generally
sufficient “to cure any risk of prejudice[.]” Zafiro v. United
States, 506 U.S. 534, 539 (1993); see also United States v. Lee,
612 F.3d 170, 185 (3d Cir. 2010) (upholding a decision to
admit evidence under Rule 404(b) in part because the district
court gave a limiting instruction). There is particular reason to
think that the jury followed those instructions here because
some of the Maxwells’ codefendants – Adler, McCarthy, and
Manno – were acquitted, despite also being associated with the
FirstPlus takeover. See, e.g., United States v. Greenidge, 495
F.3d 85, 95 (3d Cir. 2007) (noting “the fact that the jury
acquitted [a codefendant] is critical proof that the jury was
‘able to separate the offenders and the offenses’” (citation
omitted)); United States v. Sandini, 888 F.2d 300, 307 (3d Cir.
1989) (finding claim of prejudice “without merit” where a
codefendant was acquitted of some charges, “a fact indicating
that the jury carefully weighed the evidence relating to each
an appropriate Rule 403 balancing analysis and reached a
rational conclusion, we discern no error in the admission of that
evidence. United States v. Sampson, 980 F.2d 883, 889 (3d
Cir. 1992).
61
defendant and each charge”); United States v. Solis, 299 F.3d
420, 441 (5th Cir. 2002) (“[T]he jury acquitted some of the
alleged co-conspirators, supporting an inference that the jury
sorted through the evidence … and considered each defendant
and each count separately[.]”). We thus see no reason to stray
from “the almost invariable assumption of the law that jurors
follow their instructions[.]” Richardson v. Marsh, 481 U.S.
200, 206 (1987).
2. Denial of the Maxwells’ Severance
Motion39
Separately, the Maxwells assert that they are entitled to
a new trial because the District Court abused its discretion in
denying their motion to sever their trials from that of Scarfo
and Pelullo. They say that the introduction of evidence of
Scarfo’s and Pelullo’s connections to organized crime created
spillover prejudice because the Maxwells were not part of the
mob but were nonetheless effectively grouped in with it. Once
more, we are unpersuaded.
In assessing the Maxwells’ request for severance, the
District Court observed that a “fundamental princip[le]” of
federal criminal law is the “preference for joint trials of
defendants who are indicted together.” (D.I. 297 at 17 (internal
quotation marks omitted) (quoting United States v. Urban, 404
F.3d 754, 775 (3d Cir. 2005)).) Noting that the preference “is
particularly strong in cases involving multiple defendants
39
“[D]enial of severance is committed to the sound
discretion of the trial judge[.]” United States v. Eufrasio, 935
F.2d 553, 568 (3d Cir. 1991).
62
charged under a single conspiracy” (D.I. 297 at 17 (citing
United States v. Voigt, 89 F.3d 1050, 1094 (3d Cir. 1996))), the
Court held that the Maxwells did not meet the heavy burden of
demonstrating the need for severance based on a risk of
spillover prejudice.40 It also promised to instruct the jury on
“the limited admissibility of certain evidence” about Scarfo’s
and Pelullo’s ties to organized crime. (D.I. 297 at 27.)
“A defendant seeking a new trial due to the denial of a
severance motion must show that the joint trial led to ‘clear and
substantial prejudice resulting in a manifestly unfair trial[,]’” a
demanding standard that requires more than “[m]ere
allegations of prejudice[.]” United States v. John-Baptiste, 747
F.3d 186, 197 (3d Cir. 2014) (first quoting Urban, 404 F.3d at
775; and then quoting United States v. Reicherter, 647 F.2d
397, 400 (3d Cir. 1981)). The Maxwells “are ‘not entitled to
severance merely because they may have a better chance of
acquittal in separate trials.’” Id. (quoting Zafiro, 506 U.S. at
540). In making the initial determination of whether to grant
severance, the “critical issue” before a district court is “not
whether the evidence against a co-defendant is more damaging
but rather whether the jury will be able to compartmentalize
the evidence as it relates to separate defendants in view of its
40
Other defendants – Gary McCarthy, Howard
Drossner, David Adler, Donald Manno, William Handley, and
John Parisi – sought severance, many of them for the same
reasons, and the Court rejected their arguments as well.
63
volume and limited admissibility.” Id. (citation and internal
quotation marks omitted).
The Maxwells fail to show that any claimed spillover
prejudice from the organized crime evidence concerning
Scarfo and Pelullo was clear and substantial and, instead, make
“mere allegations of prejudice” that are insufficient to clear the
high bar for severance. Id. (citation omitted). In United States
v. Eufrasio, 935 F.2d 553 (3d Cir. 1991), which involved a
RICO prosecution of Scarfo’s father’s criminal enterprise, we
rejected the same sort of spillover prejudice argument. We
concluded that because “all appellants were charged with the
same conspiracy to participate in the same Scarfo enterprise,
the public interest in judicial economy favored joinder.” Id. at
568. The Maxwells’ argument based on prejudice from their
codefendants’ mob ties is even less compelling than that of the
Eufrasio defendants because, here, the District Court
repeatedly gave limiting instructions that “[t]here is no
evidence and the government does not allege that any
defendants[,] other than Scarfo and Pelullo[,] were associates
[in] any organized crime organization.” (JAC at 712, 1751.)
The Maxwells’ only response is that the jury may not have
followed these instructions. But, as discussed earlier, we
presume that the jury follows instructions, which “often will
suffice to cure any risk of prejudice.” Zafiro, 506 U.S. at 539.
There is no reason to believe otherwise in this case. Indeed,
the acquittal of other defendants indicates just the contrary.
The District Court did not abuse its discretion in concluding
that the jury could “compartmentalize the evidence” as it
related to the Maxwells, John-Baptiste, 747 F.3d at 197
64
(citation omitted), and, consequently, severance was not
warranted.
V. TRIAL ISSUES
We turn now to the purported errors at the trial. Scarfo
objects to being tried alongside his former counsel, while
Pelullo argues that his trial counsel had an undisclosed conflict
of interest by being under federal investigation during this case.
The Defendants also challenge their RICO conspiracy
convictions: Scarfo claims that the jury instructions
constructively amended the indictment as to that count, and the
other three Defendants challenge the jury instructions on and
the sufficiency of the evidence supporting one of the predicate
acts that formed the basis for their RICO conspiracy
convictions. In addition, Pelullo asserts that the instructions on
the felon-in-possession conspiracy charge were missing an
element required under Rehaif v. United States, 139 S. Ct. 2191(2019). William Maxwell further claims there was insufficient
evidence for many of his convictions. Finally, several
Defendants advance claims of error relating to the conduct of
various jurors. None of those arguments entitle any of the
Defendants to reversal of the convictions or a new trial.
A. Scarfo’s Joint Trial with Former Counsel
Donald Manno41
Scarfo argues that he deserves a new trial because he
41
We address this issue here, as arising out of trial,
because Scarfo did not move before the trial to have his case
severed from Manno’s. Manno did seek severance, but, as
65
was tried jointly with his codefendant and former attorney,
Donald Manno, who proceeded pro se. In particular, he
contends – for the first time on appeal42 – that Manno’s self-
representation “stripped” him (Scarfo) “of a fair and unbiased
trial guaranteed by the Sixth Amendment.” (NS Opening Br.
at 43.) As the government puts it, Scarfo “claims Manno had
a conflict of interest that Scarfo refused to waive, so Manno
couldn’t represent himself without violating Scarfo’s Sixth
Amendment right to conflict-free counsel.” (Answering Br. at
49.)
discussed herein, the argument he made in the District Court
was different from the Sixth Amendment theory Scarfo now
advances.
We need not decide whether Scarfo would need to
establish plain error to succeed on his unpreserved Sixth
Amendment claim or whether any violation of his rights was a
per se reversible error, since his claim lacks merit under either
standard.
42
Although, as just noted, Scarfo did not raise this issue
before the District Court, Manno did seek to sever his trial from
Scarfo’s. But even though there was a presumption that all
defendants joined each other’s motions, Manno’s request –
which articulated a need for severance to protect his own
interests – was insufficient to preserve an objection from
Scarfo. Indeed, the District Court pointed out as much,
denying one of Manno’s severance motions partly because
“Scarfo has not objected at this point to the proposed testimony,
and he would be the one prejudiced by it.” (JAB at 842.)
66
Because Scarfo was represented by independent,
conflict-free counsel throughout his trial, he was not deprived
of a Sixth Amendment right. If anything, Scarfo’s challenge
to the fairness of his trial sounds in due process more than in
the Sixth Amendment. But Scarfo waived any due process
claim he may have had and is not entitled to relief on that basis.
1. Background
Among those indicted alongside Scarfo was Manno,
who appears to have been one of Scarfo’s go-to criminal
defense attorneys. According to Manno, he represented Scarfo
in several matters, including when Scarfo was seeking habeas
relief while imprisoned on state RICO charges related to
gambling, when he was charged with possessing a deadly
weapon in connection with an altercation at an Atlantic City
bar, and when he faced charges of illegal gambling and loan-
sharking. As his codefendant in this case, however, Manno did
not represent Scarfo. For that task, the District Court appointed
counsel.
The Court allowed Manno to represent himself but
denied his initial request for severance. Prior to trial, Manno
moved once more for severance and moved for permission to
introduce evidence of “certain legal services” he had provided
to Scarfo. (D.I. 664 at 1-2.) He said he needed the evidence to
illustrate his “professional and personal relationship” with
Scarfo and Pelullo and to emphasize his role as a criminal
defense attorney “as a partial explanation” for some of his
conduct. (D.I. 664-1 at 3.) He also argued that the evidence
was relevant to show that the approximately $20,000 in fees he
received from LANA was compensation for legal services and
“totally legitimate and unrelated to [FirstPlus].” (D.I. 664-1 at
67
4.) Because Manno’s defense would depend on addressing his
relationship with Scarfo, which centered around Scarfo’s
criminal activities, Manno said that severance was necessary.
He warned that “one of two results” would occur if he and
Scarfo were tried together: “Either Scarfo or other defendants
or all will be prejudiced by the admission of other convictions
and allegations of bad acts[,] or Manno will be denied the
ability to fully develop his relationship with Scarfo and others.”
(D.I. 664-1 at 9.)
Scarfo did not object to those requests, and the District
Court granted Manno’s motion in part, authorizing him to
introduce evidence of his attorney-client relationship, but it
refused to sever the trials. Accordingly, at trial, Manno
questioned witnesses about and introduced evidence of his
prior representations of Scarfo. Although the jury found
Scarfo guilty, Manno was ultimately acquitted of all charges.
2. Sixth Amendment
Had Manno represented Scarfo at trial, there would be
weight to Scarfo’s Sixth Amendment arguments. But Manno
did not. Instead (and to repeat), Scarfo was represented by
independent, conflict-free counsel. The absence of any issues
with Scarfo’s own representation is dispositive and means that
Scarfo has no Sixth Amendment claim. Cf. United States v.
Voigt, 89 F.3d 1050, 1078 (3d Cir. 1996) (finding Sixth
Amendment caselaw inapplicable to evaluating “the possibility
that [a potential trial witness’s] prior representation of [certain
defendants] during the grand jury investigation might affect
[their] ability to receive a fair trial”).
68
The Sixth Amendment “commands, not that a trial be
fair, but that … particular guarantee[s] of fairness be
provided[.]” United States v. Gonzalez-Lopez, 548 U.S. 140,
146 (2006). It does so by defining “the basic elements of a fair
trial[,]” “including [through] the Counsel Clause.” Strickland
v. Washington, 466 U.S. 668, 684-85 (1984). That provision
entitles a criminal defendant “to have the Assistance of
Counsel for his defence.” U.S. Const. amend. VI. Scarfo does
not argue that the District Court failed to appoint him counsel,
or that he was denied “the right to adequate representation by
an attorney of reasonable competence [or] the right to the
attorney’s undivided loyalty free of conflict of interest.”
United States v. Moscony, 927 F.2d 742, 748 (3d Cir. 1991)
(citation omitted). Therefore, he suffered no deprivation of his
Sixth Amendment rights.
Scarfo musters an extensive array of cases in supposed
aid of his argument, but none are on point. In all those cases,
the defendant’s challenge related to the assistance provided by
his then-current defense counsel or his inability to select
counsel of his choice. See, e.g., Wheat v. United States, 486
U.S. 153, 155-57, 164 (1988) (approving district court’s
“refusal to permit the substitution of counsel” due to
defendant’s desired counsel’s conflicts of interest); Voigt, 89
F.3d at 1071-80 (summarizing caselaw governing “denials of
the right to counsel” of choice); Government of Virgin Islands
v. Zepp, 748 F.2d 125, 127 (3d Cir. 1984) (reversing conviction
“because trial counsel had an actual conflict of interest”).
None stand for the proposition that a defendant’s Sixth
Amendment right to counsel is violated if his former counsel
is involved in the proceedings in another capacity. See United
States v. Ramon-Rodriguez, 492 F.3d 930, 945 (8th Cir. 2007)
(“[Defendant] cites no authority, and we have found none, in
69
which [a Sixth Amendment conflicted-counsel issue arises in]
a situation involving a defendant’s prior attorney in the absence
of any alleged conflict involving actual trial counsel.”);
English v. United States, 620 F.2d 150, 151-52 (7th Cir. 1980)
(holding that defendant could not raise an ineffective-
assistance-of-counsel claim against former attorney who had
switched to representing codefendant).
In the absence of any conflicts between Scarfo and the
trial counsel he actually had, the effort to use the Sixth
Amendment right to conflict-free counsel to condemn Manno’s
presence in the case “entails the pounding of a square peg into
a round hole.”43 United States v. Poe, 428 F.3d 1119, 1122-24
(8th Cir. 2005) (finding no conflict of interest from fact that
codefendant’s counsel previously represented defendant in
separate state-court prosecution).
Scarfo nevertheless tries to support his claim by
pointing to a conversation the District Court had with
government counsel and Manno. In that discussion, the Court
“urge[d] [Manno] to seek independent counsel … and not
represent [him]self[,]” explaining that he could be “subject …
to [an] ethics investigation or prosecution.” (Nicodemo Scarfo
Appendix (“NSA”) at 6.) The Court explained to Manno that
43
Scarfo insists that, at a minimum, the District Court
should have conducted an inquiry into the potential conflict,
and he claims that its failure to do so was reversible error.
Again, though, he relies on caselaw focused on protecting a
defendant’s Sixth Amendment right to have his current
counsel be conflict-free. That concern was not in play here,
making those cases inapposite.
70
he was in a “very difficult position” due to the “potential risk
of revealing client confidences without the permission of [his]
client which would … potentially expose[] [him] to ethics
problems.”44 (NSA at 5.)
That conversation avails Scarfo nothing. The District
Court’s warnings to Manno confirm that the Court was aware
that Manno might be opening himself up to potential ethical
and professional conflicts by choosing to represent himself.
But any issues Manno faced would not, and did not, affect
Scarfo’s ability to receive conflict-free assistance of counsel
from his trial attorney.45
44
In passing, Scarfo also attempts to frame that
conversation as infringing on his Sixth Amendment right to be
present at all critical stages of trial. The government explains
that it asked for the chambers conference because Manno made
certain statements in his severance motion that were
inconsistent with the government’s evidence, and it wanted to
give Manno a chance to retract his false statements before they
were revealed in open court. Scarfo makes no showing that his
absence from that discussion undermined his rights or harmed
his defense at trial, so the conference does not provide a basis
for disturbing his convictions. Cf. infra Section V.F.2.
45
Similarly misplaced is Scarfo’s reliance on the New
Jersey Rules of Professional Conduct to argue that Manno
violated his ethical obligations, an issue that he forfeited in any
event by failing to raise it in his opening brief. See United
States v. Pelullo, 399 F.3d 197, 222 (3d Cir. 2005). That
argument is simply beside the point in this Sixth Amendment
71
Ultimately, any potential legal or ethical issues arising
from Scarfo being tried alongside Manno are not cognizable as
a violation of the Sixth Amendment right to counsel.
3. Due Process
Setting aside Scarfo’s Sixth Amendment argument, the
facts he alleges do implicate interesting questions as to his
Fifth Amendment due process rights. See Strickland, 466 U.S.
at 684-85 (noting that “[t]he Constitution guarantees a fair trial
through the Due Process Clauses,” while the Sixth Amendment
only protects particular “elements of a fair trial”); cf. Voigt, 89
F.3d at 1071-77 (affirming district court’s decision to
disqualify defendant’s counsel who had conflict of interest
with codefendants, in the “interest[] of the proper and fair
administration of justice”). Scarfo asserts that, due to the
conflict of interest caused by Manno’s presence as a
codefendant, he could not take the stand – since that would
open himself up to cross-examination by Manno – and he was
prevented from asserting an advice-of-counsel defense. Those
claims raise non-frivolous issues about trial severance, but
Scarfo has expressly disclaimed any “challenge [to] the district
court’s decision to deny Manno’s motions seeking to sever his
trial from that of his clients.” (NS Opening Br. at 19.)
Scarfo’s disclaimer is an unequivocal waiver as to
severance – the only plausible step the District Court could
have taken to eliminate any potential due process issues with
challenge, which requires a showing that Scarfo’s actual trial
counsel provided ineffective assistance.
72
the joint trial. 46 In the face of that waiver, we decline to
consider an argument Scarfo has not himself articulated. See
United States v. Sineneng-Smith, 140 S. Ct. 1575, 1579 (2020)
(“[O]ur [adversarial] system is designed around the premise
that parties represented by competent counsel know what is
best for them, and are responsible for advancing the facts and
argument entitling them to relief.” (internal quotation marks,
citation, and brackets omitted)). The District Court’s denial of
severance may well be entirely justifiable, but even if it were
not, Scarfo does not advance a due process theory for
severance, so we will not “sally forth … looking for wrongs to
right.” Id. (citations omitted).
46
Scarfo also offers several alternative solutions in lieu
of severance, but there is a disconnect between those proposed
remedies and Scarfo’s complaints. As mentioned above,
Scarfo’s theory of unfairness and prejudice is that Manno’s
mere presence as a codefendant at the trial prevented Scarfo
from taking the stand and raising an advice-of-counsel defense.
He now suggests that the District Court should have
disqualified Manno from representing himself or, at a
minimum, appointed standby counsel for Manno. Scarfo does
not explain how those strategies – which would have entailed
abridging Manno’s Sixth Amendment right to self-
representation – would have prevented the harm he says he
suffered.
Scarfo also assigns error to the District Court’s failure
to obtain a conflict waiver from him. But he undercuts that by
saying that even if the Court had done so, “such a waiver would
be invalidated” – thus taking his own proposed remedy off the
table. (NS Opening Br. at 99 n.27.)
73
B. Pelullo’s Sixth Amendment Ineffective
Assistance of Counsel Claim47
Pelullo’s longtime attorneys – William Maxwell,
Donald Manno, and Gary McCarthy – were all indicted
alongside Pelullo, leaving him without counsel. Therefore, the
District Court appointed Troy Archie to represent him under
18 U.S.C. § 3006A. Given the case’s complexity and
discovery demands, the Court shortly thereafter appointed J.
Michael Farrell as co-counsel. Pelullo now seeks a new trial
or an evidentiary hearing for further factfinding because, he
argues, Farrell’s performance was rendered deficient by a
previously undisclosed conflict of interest. We are not
persuaded and hold that Pelullo did not suffer ineffective
assistance of counsel.
1. Background
Pelullo and Farrell had their fair share of disagreements
at the outset of Farrell’s engagement. The two apparently did
not see eye-to-eye on trial strategy, and Pelullo did not
appreciate Farrell’s lack of engagement. Those disputes are
unrelated to the conflict-of-interest issue before us, but, within
47
Whether a trial counsel’s representation of a
defendant was constitutionally inadequate is a mixed question
of law and fact. When reviewing mixed questions, we apply
de novo review to applications of law, but review for clear error
“case-specific factual issues” like the “weigh[ing of] evidence”
and “credibility judgments[.]” U.S. Bank Nat’l Ass’n ex rel.
CWCapital Asset Mgmt. LLC v. Vill. at Lakeridge, LLC, 138 S.
Ct. 960, 967-69 (2018).
74
a few months of Farrell’s appointment, they led to Pelullo’s
request that Farrell be replaced. Although the Court granted
that request, Pelullo soon regretted losing Farrell, and he asked
to have him reappointed. Pelullo explained that he had
“irreconcilable differences” with the lawyer who had been
appointed in Farrell’s stead and that replacing Farrell was “an
error in … judgment” that arose from his “not clearly
understanding [the] situation and how fortunate [he] was to
have Mr. F[a]rrell.” (D.I. 486.) Pelullo praised Farrell, stating
he was “up to speed” and “more than comp[etent] and more
than effective[.]” (D.I. 486.) The Court acquiesced to
Pelullo’s wishes and reappointed Farrell in July 2013.
Farrell represented Pelullo through trial (alongside
Archie), employing aggressive litigation tactics. The District
Court repeatedly reprimanded Farrell for, among other things,
repeated interruptions and argumentativeness. At several
points, the Court warned him that, “if [he thought his] goal here
[was] to set up an ineffective assistance of a counsel defense[,]”
he would be “take[n] … off th[e] case[.]” (E.g., JAC at 318.)
After trial, the Court determined that Pelullo required only one
attorney at sentencing and terminated Farrell’s appointment in
November 2014, after which Pelullo requested Farrell’s
reassignment. He told the Court that, despite their early
differences, he and Farrell had formed “a bond” and that
“Farrell [was] agreeable to [his] defense strategy[.]” (D.I.
1231; JAE at 463-64.) Pelullo noted that he “d[id] not seek
counsel of choice, [but] rather effective counsel.” (D.I. 1231.)
The Court denied that request in April 2015.
Meanwhile, unbeknownst to Pelullo, Farrell had been
dealing with his own legal troubles. In March 2014, about
halfway through Pelullo’s trial, a subpoena was issued for
75
Farrell’s office manager to testify about Farrell before a grand
jury in the United States District Court for the District of
Maryland. Farrell, in response, retained Joseph Fioravanti, a
former federal prosecutor. Fioravanti tried to discover whether
Farrell was either a subject or target of the investigation. Those
efforts proved unsuccessful, so Fioravanti advised Farrell not
to inform his clients, including Pelullo, because he was not yet
known to be a subject or target. Farrell heeded that advice and
kept from Pelullo, Archie, and the District Court that some
kind of investigation in Maryland was underway. The U.S.
Attorney’s Office for the District of New Jersey, which was
prosecuting the Defendants here, remained similarly unaware
of the grand jury investigation in the District of Maryland.
It was not until August 2014, the month after the trial in
this case ended, that Fioravanti received a “target letter”
informing him that the U.S. Attorney’s Office for the District
of Maryland was considering filing criminal charges against
Farrell. (JAE at 927, 1093, 1102.) In January 2016, more than
eighteen months after the guilty verdicts here, an indictment
charging Farrell with crimes relating to a large marijuana
trafficking ring was unsealed. That charge bore no relation to
Pelullo’s crimes. United States v. Farrell, 921 F.3d 116, 123
(4th Cir. 2019). It was only after Farrell’s indictment became
public that the prosecutors on Pelullo’s case became aware of
the charges.
By the time Farrell’s indictment was unsealed, Pelullo
had already appealed his conviction. Once that indictment
came to light, however, Pelullo sought and obtained from us a
limited remand for further factfinding on what Pelullo claimed
was a conflict of interest with Farrell. On remand, Pelullo filed
a Rule 33 motion for a new trial on the ground that the evidence
76
revealed Farrell had provided ineffective assistance of counsel.
In his motion, Pelullo claimed that Farrell had labored under a
conflict of interest during the trial due to the investigation in
Maryland. Despite previously not just accepting but actively
promoting Farrell’s aggressive trial tactics, Pelullo alleged that
Farrell’s aggression was caused by the stress of being under
investigation himself and that those tactics were damaging.
The District Court held a hearing on the motion, at
which Farrell bolstered that line of argument. He confirmed
that his “aggressive nature” had been due to the pending
investigation and that it “affected [his] ability to represent
[Pelullo] in a conflict-free manner[.]” (JAE at 615-16.) He
explained that he viewed the prosecution of himself as “a direct
threat on the ability of criminal defense attorneys in Maryland
– in America to defend their clients” and that “it was
inconsistent with the principles of our Republic[.]” (JAE at
579.) It was, he claimed, his personal indignation that fueled
his overly aggressive defense of Pelullo.
The District Court denied the new-trial motion. It found
Farrell’s testimony entirely unreliable, and it determined that
the investigation in the District of Maryland did not affect
Farrell’s performance at trial. The Court explained further that
Pelullo may have “at most” had a potential conflict-of-interest
claim due to Farrell’s failure to disclose the investigation,
rather than by virtue of Farrell’s aggressive defense. (JAE at
1046.) But, given the overwhelming evidence of Pelullo’s
guilt and his evident approval of Farrell’s tactics, the Court
concluded that Pelullo “fail[ed] utterly to demonstrate any
prejudice.” (JAE at 1046.)
77
2. Ineffective Assistance of Counsel Claim
Although we typically do not entertain ineffective-
assistance-of-counsel claims on direct appeal, we may do so
“when the record is sufficient to allow determination of the
issue.” United States v. Thornton, 327 F.3d 268, 271 (3d Cir.
2003). Because we previously remanded the issue for further
factfinding and the District Court conducted an extensive
evidentiary hearing, the record is sufficient for us to consider
the issue now. There is no clear error in the finding that
Farrell’s self-deprecatory testimony was unreliable and that his
representation of Pelullo was unaffected by the Maryland
investigation. See United States v. Gambino, 864 F.2d 1064,
1071 n.3 (3d Cir. 1988) (applying clear-error standard to
district court’s factfinding with respect to “external events and
the credibility of the witnesses”). On the record developed in
the District Court, we agree that this argument for a new trial
fails.
As already discussed, supra Section V.A.2, the Sixth
Amendment protects a criminal defendant’s right to effective
assistance of counsel. U.S. Const. amend. VI; United States v.
Cronic, 466 U.S. 648, 653-57 (1984). That right is “recognized
… because of the effect it has on the ability of the accused to
receive a fair trial.” Cronic, 466 U.S. at 658. Pursuant to that
right, counsel owes a defendant certain duties, including the
“duty to perform competently” and the “duty of loyalty[.]”
Government of Virgin Islands v. Zepp, 748 F.2d 125, 131-32
(3d Cir. 1984) (citing Strickland v. Washington, 466 U.S. 668,
688 (1984)).
Nonetheless, “[a]n error by counsel … does not warrant
setting aside the judgment of a criminal proceeding if the error
78
had no effect on the judgment.” Strickland, 466 U.S. at 691.
Accordingly, a criminal defendant pursuing an ineffective
assistance claim must show not only that his counsel’s
performance was deficient, but also that the deficient
performance prejudiced his defense. Id. at 687. Although a
defendant must make both showings to succeed, in certain
circumstances prejudice may be presumed. One such
circumstance is when counsel breaches the duty of loyalty to
his client by maintaining an actual conflict of interest during
the representation. Id. at 692.
Conflicts arise when counsel’s personal interests are
“inconsistent, diverse or otherwise discordant with those of his
client and … affect[] the exercise of his professional judgment
on behalf of his client.” Zepp, 748 F.2d at 135 (citation and
internal quotation marks omitted). When there is “a[n actual]
conflict that affected counsel’s performance – as opposed to a
mere theoretical division of loyalties” – the defendant need not
make a separate showing of prejudice. Mickens v. Taylor, 535
U.S. 162, 171 (2002). A defendant alleging an actual conflict
must establish that “trial counsel’s interest and the defendant’s
interest diverge[d] with respect to a material factual or legal
issue or to a course of action.” Zepp, 748 F.2d at 136(alteration in original) (citation and internal quotation marks
omitted).
A criminal investigation of counsel, even for crimes
unrelated to those being prosecuted in the defendant’s trial, can
generate an actual conflict when counsel seeks to curry favor
with the attorneys prosecuting his client, thus resulting in
counsel “pull[ing] … his punches.” Reyes-Vejerano v. United
States, 276 F.3d 94, 99 (1st Cir. 2002). Conversely, a lack of
evidence that counsel pulled his punches may serve as an
79
indication that he was not “intimidated by a threat of
prosecution” in defending his client. United States v. Montana,
199 F.3d 947, 949 (7th Cir. 1999). And where a defendant
“show[s] only that his lawyer was under investigation and that
the lawyer had some awareness of an investigation” during the
defendant’s trial, but fails to demonstrate that the lawyer’s
interests diverged from that of the defendant, beyond “the
general and unspecified theory that [the attorney] must have
wanted to please the government[,]” he has not demonstrated
an actual conflict. Reyes-Vejerano, 276 F.3d at 99.
That is the case here. Pelullo has presented no evidence
that prosecutors in the District of New Jersey knew of the case
against Farrell in the District of Maryland or that Farrell
thought they did. Cf. Armienti v. United States, 234 F.3d 820,
824-25 (2d Cir. 2000) (holding that the defendant presented a
“plausible claim” of an actual conflict where his attorney “was
being criminally investigated by the same United States
Attorney’s office that was prosecuting” the defendant, and,
during trial, he failed “to conduct further investigation, fail[ed]
to vigorously cross-examine the government’s witnesses, …
fail[ed] to make various objections[,]” was “ill-prepared and
distracted[,]” and “misadvised [the defendant] not to talk to the
probation department at the time of his sentencing”). There is
thus no reason to think that Farrell pulled his punches – that he
took it easy on the government to secure the prosecutors’ good
favor.
In fact, he did quite the opposite, something Pelullo
acknowledges and now tries to turn to his advantage. Pelullo
contends that Farrell’s “rage and a quixotic sense of revenge
against an unfair [g]overnment[,]” fueled by the criminal
investigation, turned him into “an aggressive madman” driven
80
“not by Pelullo’s best interests but … [instead by] his personal
outrage about his own legal problems.” (SP Opening Br. at 43-
44.) Pelullo offers examples of when Farrell’s “rage”
supposedly made his representation inadequate, such as his
repeated misspeaking on cross and direct examination,
presenting a failed Daubert challenge, and offering a
“catastrophic closing argument” that was a three-day “epic rant,
devoid of purpose or focus[.]” (SP Opening Br. at 52-54.)
Farrell’s personal interest in getting revenge against the
government, Pelullo claims, conflicted and interfered with the
duty to act in Pelullo’s best interests.
Those examples may speak to Farrell’s level of
competence, but they do not demonstrate any divergence
between his interests and those of Pelullo. Zepp, 748 F.2d at
136. Farrell’s pugnacious approach was fully approved by
Pelullo, and Farrell’s mistakes were, as the District Court
noted, unsurprising in the course of “a very long trial[.]” (JAE
at 529.) See Strickland, 466 U.S. at 689 (warning against
“second-guess[ing defense] counsel’s assistance after
conviction or adverse sentence” and too readily deeming
representation deficient in hindsight); United States v.
Williams, 631 F.2d 198, 204 (3d Cir. 1980) (holding no
ineffective assistance of counsel where defendant concurred in
his counsel’s trial strategy). In fact, Pelullo sought out
Farrell’s services precisely because of his aggressive defense
style. That he got what he wanted but it didn’t produce the
desired results does not mean he is free to call it
constitutionally deficient advocacy now.
The alleged conflict of interest affecting Farrell’s
representation is significantly different from fact patterns in
which an actual conflict has been found. In Government of
81
Virgin Islands v. Zepp, 748 F.2d 125, 136 (3d Cir. 1984), we
reasoned that defense counsel should have withdrawn because
he “could have been indicted for the same charges on which he
represented [the defendant] … and … was a witness for the
prosecution.” Farrell, by contrast, was under investigation for
activities unrelated to Pelullo’s charges and had no personal
stake in the success or failure of Pelullo’s defense. Nor does
the trial record present a scenario in which the same United
States Attorney’s Office prosecuted both the defendant and
investigated his attorney. In such a situation, there is a clear
motive for counsel to “temper[] his defense … in order to curry
favor with the prosecution, perhaps fearing that a spirited
defense … would prompt the Government to pursue the case
against [him] with greater vigor.” United States v. Levy, 25
F.3d 146, 156 (2d Cir. 1994); see, e.g., Armienti, 234 F.3d at
824-25 (ordering an evidentiary hearing on a potential conflict
of interest because defense counsel was under investigation by
the same United States Attorney’s Office prosecuting the
defendant); United States v. McLain, 823 F.2d 1457, 1463-64
(11th Cir. 1987) (holding that when counsel was under
investigation by the same United States Attorney’s Office as
his client an actual conflict of interest existed, warranting a
new trial), overruled on other grounds as recognized by United
States v. Watson, 866 F.2d 381, 385 (11th Cir. 1989).
Pelullo argues that we should assume that the
government attorneys here were aware of the grand jury
investigation in the District of Maryland. He asks that we treat
the two U.S. Attorneys’ offices as “one combined entity[,]”
and thus conclude that he was prejudiced. (SP Opening Br. at
77.) We do not accept that premise. See United States v.
Pelullo, 399 F.3d 197, 218 (3d Cir. 2005) (declining to impute
to the prosecution team constructive knowledge of information
82
held by a federal agency that was not involved in the
investigation and prosecution of the case).
Finally, the timeline belies Pelullo’s argument that
Farrell began his representation of Pelullo “motivated by his
own personal anima rather than the best interests of his client.”
(SP Opening Br. at 45.) As Farrell testified, he was not aware
of the investigation’s existence until halfway through trial, in
either March or April of 2014. Without that knowledge, Farrell
could not have begun his representation with the intention
Pelullo attributes to him. Farrell’s consistently aggressive
tactics suggest that his litigation strategy was not affected by
his being under investigation but was rather a matter of style.
We thus conclude that Farrell’s representation of Pelullo did
not present an actual conflict.
To the extent that Pelullo and Farrell had a potential
conflict of interest, Pelullo needed to show that the potential
conflict caused him prejudice. He has failed to do that.
Strickland, 466 U.S. at 687. There is no reasonable probability
he would have been acquitted in the absence of Farrell’s
services, given the overwhelming evidence of his guilt. See id.(“This requires showing that counsel’s errors were so serious
as to deprive the defendant of a fair trial, a trial whose result is
reliable.”).
In short, Pelullo was not deprived of his Sixth
Amendment right to the effective assistance of counsel and so
is not entitled to a new trial.48
48
Because the District Court fully developed the record
and did not err, Pelullo is not entitled to yet another evidentiary
83
C. Convictions for RICO Conspiracy Under 18
U.S.C. § 1962(d)
The jury convicted the Defendants of conspiring, in
violation of RICO, to “conduct or participate … in” the affairs
of an enterprise engaged in interstate commerce “through a
pattern of racketeering activity[.]” 18 U.S.C. § 1962(c); id.§ 1962(d) (making it “unlawful for any person to conspire to
violate any of the provisions of subsection … (c)”). RICO lists
dozens of federal crimes and incorporates many state crimes
that qualify as predicate “racketeering activit[ies.]” Id.
§ 1961(1). To constitute a “pattern[,]” there must be “at least
two acts of racketeering activity[.]” Id. § 1961(5). Here, that
meant, to be guilty of the conspiracy, each Defendant had to
have agreed that he or his co-conspirators would perform two
or more of the predicate acts listed in § 1961(1). The jury
found, in response to special interrogatories, that Pelullo and
Scarfo each agreed to the commission of eight such predicate
acts, that William Maxwell agreed to the commission of seven,
and that John Maxwell agreed to the commission of six. The
Defendants raise claims of error related to the RICO
conspiracy charge, but none is persuasive.
hearing either.
84
1. Constructive Amendment of
Indictment49
Scarfo complains to us about the verdict form’s special
interrogatories. 50 According to Scarfo, the District Court
violated his Fifth Amendment rights by constructively
amending the indictment in the verdict form when it specified
49
We review for abuse of discretion a district court’s
determination of whether to submit special interrogatories to a
jury. United States v. Console, 13 F.3d 641, 663 (3d Cir.
1993). While a properly preserved claim of constructive
amendment or variance receives plenary review, we review for
plain error when it is raised for the first time on appeal. United
States v. Vosburgh, 602 F.3d 512, 531 (3d Cir. 2010). The test
for plain error requires the appellant to show “(1) an ‘error’;
(2) ‘that is plain’; (3) ‘that affect[ed] substantial rights’; and
(4) that failure to correct the error would ‘seriously affect[ ] the
fairness, integrity or public reputation of judicial
proceedings.’” United States v. Defreitas, 29 F.4th 135, 144
(3d Cir. 2022) (alterations in original) (quoting United States
v. Olano, 507 U.S. 725, 732 (1993)).
50
Pelullo and John Maxwell both specifically adopt
Scarfo’s argument “as to … shifting of RICO[.]” (SP Opening
Br. at 223; JM Opening Br. at 49.) To the extent they intend
to refer to Scarfo’s constructive amendment argument, their
claims fail for the same reason as does Scarfo’s – namely, that
the verdict form did not expand the potential bases for liability
under the RICO charge beyond those listed in the indictment.
William Maxwell, meanwhile, does not specifically adopt
Scarfo’s argument, so he has forfeited it.
85
a particular group of racketeering activities applicable to each
defendant. Separately, he suggests that the special
interrogatories made him seem comparatively more culpable
than the codefendants for whom fewer predicate acts were
listed, prejudicing him in the eyes of the jury and causing juror
confusion. He did not raise those issues at trial, so we review
for plain error.51 United States v. Duka, 671 F.3d 329, 352 (3d
Cir. 2011).
Eleven of the thirteen defendants were charged with
engaging in a RICO conspiracy. That count in the indictment
51
Scarfo argues that his constructive amendment claim
was preserved when his attorney raised the following concern
in the District Court:
[G]iven that it is a RICO conspiracy
charge I think it would be worth reiterating with
the jurors that all defendants are charged with the
same RICO conspiracy charge because I think it
is – I think it was a little bit unclear, given your
remarks to them about the verdict form, that they
may have concluded that some defendants are
charged with different forms of – with different
kinds of RICO conspiracy and I think that may
generate some confusion.
(JAC at 12498.) The District Court responded that the “verdict
form itself” showed that all defendants were charged with the
same RICO conspiracy and that the only difference among
them was “in the predicate qualifying acts.” (JAC at 12498.)
Scarfo at no point referenced the indictment nor mentioned
constructive amendment or prejudice, so plain-error review is
appropriate.
86
listed eight specific predicate acts, namely, mail fraud, wire
fraud, bank fraud, obstruction of justice, extortion, interstate
travel in aid of racketeering, money laundering, and securities
fraud.
The verdict form asked the jury to first indicate whether
it found Scarfo and his alleged co-conspirators guilty or not
guilty of RICO conspiracy. Below that, special interrogatories
appeared under each defendant’s name, asking if the jury
“unanimously find[s] that the government proved beyond a
reasonable doubt” that the named defendant agreed to commit
specified predicate acts. (GSA at 409-15.) The form provided
“yes” or “no” spaces for the foreman to check for each
predicate act. Some defendants were charged with different
and fewer predicate acts than others were. For example,
Scarfo’s name on the verdict form included all eight potential
predicate acts (as it did in the indictment), while some of his
co-conspirators had fewer predicate acts listed. The District
Court instructed the jury that they needed to unanimously find
an answer on the interrogatories regarding acts of racketeering
activity but that they should not “answer these interrogatories
until after [they] ha[d] reached [their] verdict.” (JAC at
12390.)
The Fifth Amendment requires that a defendant be tried
only for crimes for which he has been indicted. See U.S. Const.
amend. V; Stirone v. United States, 361 U.S. 212, 217 (1960).
Accordingly, a court cannot later amend an indictment – either
formally or constructively – to include new charges. Ex parte
Bain, 121 U.S. 1, 6-9 (1887). A constructive amendment
occurs when the court “broaden[s] the possible bases for
conviction from th[ose] which appeared in the indictment.”
United States v. McKee, 506 F.3d 225, 229 (3d Cir. 2007)
87
(citation and internal quotation marks omitted). For instance,
an indictment is constructively amended if the jury instructions
“modify essential terms of the charged offense” such that “the
jury may have convicted the defendant for an offense differing
from the offense the indictment returned by the grand jury
actually charged.” United States v. Daraio, 445 F.3d 253, 259-
60 (3d Cir. 2006).
That did not take place here. The interrogatories
required the jury to support their decision by identifying at
least two predicate acts for each defendant, after determining
whether the defendants were guilty of RICO conspiracy.
Those interrogatories did not, as Scarfo argues, turn the
predicate acts into elements of the RICO conspiracy. The
indictment alleged that each defendant agreed to commit at
least two predicate acts and listed all the predicates that later
appeared in the interrogatories. If anything, the District Court
narrowed, rather than “broaden[ed,] the possible bases for
conviction” by instructing jurors to find each predicate act
unanimously beyond a reasonable doubt and by removing
certain predicate acts for some defendants. McKee, 506 F.3d
at 229; cf. United States v. Miller, 471 U.S. 130, 136 (1985)
(“[T]he right to a grand jury is not normally violated by the fact
that the indictment alleges more crimes or other means of
committing the same crime [than are proven at trial].”). Scarfo,
in fact, had the same eight predicate acts listed under his name
on the verdict form as were charged in the indictment. For him,
then, there was no difference at all between the indictment and
the potential bases for conviction listed in the verdict form.
Scarfo also argues that listing more predicates under his
name than under his codefendants’ names was unfair and
caused prejudice and juror confusion. The District Court’s
88
instructions remedied any potential problem, however, by
clarifying to the jurors that they first needed to find each
defendant guilty or not guilty before turning to the
interrogatories as a check on their verdict. See United States v.
Console, 13 F.3d 641, 663 (3d Cir. 1993) (noting that “an
instruction to the jury to answer the [special] interrogatories
[regarding RICO predicates] only after it votes to convict”
“alleviat[es] the danger of prejudice to the defendant”).
Moreover, any disparity between Scarfo and the other
defendants was of his own making. There was evidence that
he engaged in more criminal wrongdoing than some of his
codefendants. Given his own conduct, he cannot now
complain that he may have appeared more culpable before the
jury than others did. We thus detect no error, much less plain
error, in the formulation of the special interrogatories
accompanying the RICO conspiracy charge.
2. Jury Instructions and Sufficiency of the
Evidence
Next, the Defendants challenge the jury instructions and
the sufficiency of the evidence pertaining to the RICO
conspiracy convictions, but they do so by attacking only one
predicate act: extortion under the federal Hobbs Act.52 Their
52
Pelullo and William Maxwell set forth the challenges
to the RICO conspiracy convictions that are addressed in this
section. Their arguments were specifically adopted by each
other and by John Maxwell, so the claims in this section apply
to all three of those Defendants. Though Scarfo did not
specifically adopt the other Defendants’ arguments and thus
forfeited them, see supra note 19, we nonetheless refer to the
89
challenges thus fail for a simple reason: they do not address
any of the other predicate acts that support those convictions,
and each convicted Defendant had more than two such acts to
their discredit, so the elimination of the Hobbs Act predicate
makes no difference.53 Even if we agreed with their Hobbs Act
arguments (which we do not), their convictions for RICO
conspiracy are still supported by the other predicate acts found
by the jury. See United States v. Pungitore, 910 F.2d 1084,
1107 (3d Cir. 1990) (“Thus, even if we deleted the [extortion]
act, we would affirm the convictions” for RICO conspiracy.).
Their convictions for RICO conspiracy thus stand.
D. Firearm Conspiracy Conviction Following
Rehaif54
Pelullo was charged with a conspiracy, in violation of
18 U.S.C. § 371, having two objects: first, to provide firearms
arguments in this subsection as belonging to “the Defendants”
for the sake of simplicity.
53
Scarfo and Pelullo were each found to have agreed to
all eight of the listed predicates. Supra p. 81. William
Maxwell was found to have agreed to the commission of mail
fraud, wire fraud, obstruction of justice, extortion, interstate
travel in aid of racketeering, money laundering, and fraud in
the sale of securities. John Maxwell was found to have agreed
to the commission of mail fraud, wire fraud, extortion,
interstate travel in aid of racketeering, money laundering, and
fraud in the sale of securities.
54
“[U]npreserved Rehaif claims are subject to plain-
90
to felons (namely, Scarfo and himself), contrary to 18 U.S.C.
§ 922(d)(1), and, second, to unlawfully possess firearms as a
felon, contrary to 18 U.S.C. § 922(g)(1). He objects to his
conviction on that count and asserts that the government failed
to allege in the indictment and prove at trial, under Rehaif v.
United States, 139 S. Ct. 2191 (2019), that he knew he was a
felon when he possessed the guns. Even if that claim had merit,
however, his challenge fails because he has not identified any
error in his conviction as to the first object of the conspiracy –
namely, to transfer firearms to felons in violation of
§ 922(d)(1). Because that is an independent and sufficient
basis to affirm the guilty verdict on the conspiracy count, we
need not, and do not, address whether there was error as to the
second object of the conspiracy, the possession of firearms.
In its investigation, the government seized a small
arsenal of guns and ammunition from Pelullo’s and Scarfo’s
homes, Pelullo’s office, and their yacht. It also collected
evidence showing how Pelullo and Scarfo had acquired those
weapons: for example, it uncovered Pelullo’s and the Maxwell
brothers’ coordinated efforts to have John Maxwell drive a
firearm across the country from Dallas to Scarfo’s home in
New Jersey. See infra Section V.E.1. Since Pelullo and Scarfo
had previously been convicted of felonies, neither of them was
allowed to have a gun. As noted earlier, supra p. 8, Pelullo had
convictions for bank fraud, making false statements in an SEC
filing, and wire fraud, while Scarfo’s criminal record included
a guilty plea for conducting an illegal gambling business. The
government thus alleged in the indictment that Pelullo
error review[.]” Greer v. United States, 141 S. Ct. 2090, 2099
(2021).
91
unlawfully conspired both to violate § 922(d)(1) by providing
firearms to Scarfo and himself and to violate § 922(g)(1) by
possessing firearms.
Pelullo focuses his arguments on the second object of
the conspiracy charge, the § 922(g)(1) violation, but he does
not argue that there was insufficient proof that he conspired to
transfer firearms to Scarfo in violation of § 922(d)(1). That
failure dooms his claim. In a “multiple-object conspiracy” like
this one, a guilty verdict will stand so long as there is sufficient
evidentiary support for any of the charged objects. Griffin v.
United States, 502 U.S. 46, 47, 56-57 (1991). We may thus
“affirm [Pelullo’s] conviction[] as long as we find that there
was sufficient evidence with respect to one of the [two] alleged
prongs of the conspiracy.” United States v. Gambone, 314
F.3d 163, 176 (3d Cir. 2003).
Section 922(d)(1) makes it unlawful “to sell or
otherwise dispose of any firearm … to any person” while
“knowing or having reasonable cause to believe that such
person” has been indicted for or convicted of “a crime
punishable by imprisonment for a term exceeding one year[.]”
That same mens rea (or guilty state of mind) – namely,
“knowing or having reasonable cause to believe” that the
recipient of the firearms is a convicted felon – also applies to
cases, like this one, involving a conspiracy to violate
§ 922(d)(1). That is because the government cannot secure a
conspiracy conviction without proving that the defendant had
the mens rea required for the substantive offense that was the
object of the conspiracy. See United States v. Alston, 77 F.3d
713, 718 (3d Cir. 1996). The Supreme Court’s Rehaif decision
applied the “presumption in favor of scienter” (that is, a
presumption of intent or knowledge of wrongdoing) to read
92
into § 922(g) a requirement that the defendant know his status
as a member of a class of persons prohibited from having a
firearm, but that has no bearing on § 922(d), which contains an
express mens rea element. 139 S. Ct. at 2194-96; see also id.
at 2209 (Alito, J., dissenting) (arguing that the majority read
into § 922(g) a mens rea element more stringent than the one
that Congress explicitly required for § 922(d) charges).
Perhaps it is no surprise that Pelullo does not challenge
the § 922(d)(1) object of the conspiracy conviction, since
overwhelming trial evidence shows that Pelullo knew or, at a
minimum, had powerful cause to believe, that Scarfo was a
felon when Pelullo conspired to transfer a firearm to him.
Pelullo’s counsel explained to the jury, in his opening
statement, that “[t]he reason why [Pelullo] helped Mr. Scarfo
is because they’re both prior felons.” (JAC at 100.) Counsel
leaned on Scarfo’s and Pelullo’s prior felonies as part of a
narrative of rags to riches turned sour by government
overreach, painting them as “two felons who were in business
together that had a checkered past” who had turned their lives
around to “mak[e] millions of dollars” in “legitimate” business.
(JAC at 96.) In his closing argument, Pelullo’s counsel again
emphasized to the jurors that Pelullo and Scarfo were “two
convicted felons” who had supposedly “partner[ed] in good
faith to succeed in business legitimately[.]” (JAC at 12805.)
Moreover, as more fully described in the next section, infra
Section V.E.1, the way in which Pelullo endeavored to procure
a firearm for Scarfo by secretive means – having John Maxwell
buy a gun in Texas and drive it halfway across the country to
New Jersey and instructing him to avoid law enforcement
officials along the way – demonstrates Pelullo well understood
that Scarfo, as a prior felon, was prohibited from having
firearms. Because there was sufficient evidentiary support for
93
the § 922(d)(1) object of the conspiracy count at issue, that in
itself is enough to sustain the conviction, regardless of any
potential Rehaif error associated with the § 922(g)(1) object.55
55
Pelullo also asserts that the Rehaif error entitles him
to “complete dismissal of the indictment” or, at a minimum,
vacatur of the RICO conspiracy conviction, since the
indictment and the government’s case at trial relied heavily on
the firearms. (3d Cir. D.I. 322 at 21-24.) But any Rehaif error
here would not require automatic reversal of his conviction.
Greer, 141 S. Ct. at 2100. Rather, because Pelullo did not
object to the government’s mentions of the firearms (or the
presence of the guns in the courtroom), he bears the burden, on
plain-error review, of showing a “reasonable probability” that
he would have been acquitted of the other charges but for the
gun evidence. Id. at 2096-97. His conclusory claim of
“extreme prejudice” due to a “changed … dynamic [at] trial”
caused by the guns is insufficient to carry that burden. (3d Cir.
D.I. 322 at 25.) It is also unsupported by the record. While the
RICO conspiracy portion of the indictment mentioned the
firearms, none of the charged racketeering predicate offenses
had anything to do with the firearms conspiracy. And the case
against Pelullo at trial on the other counts rested on a great deal
more evidence than just his involvement with firearms –
namely, the extensive testimonial and documentary proof of
his leading role in the FirstPlus takeover scheme.
94
E. Sufficiency of Evidence to Support William
Maxwell’s Convictions
1. Conviction for Conspiracy to
Unlawfully Transfer or Possess a
Firearm56
William Maxwell disputes the sufficiency of the
evidence supporting his conviction for conspiracy to
unlawfully transfer a firearm.57 That count was brought under
the general conspiracy statute, 18 U.S.C. § 371, which requires
the government to prove “(1) an agreement between two or
more persons to achieve an unlawful goal; (2) the defendant
intentionally joined the agreement, with knowledge of its
objective; and (3) an overt act taken in furtherance of the
conspiracy by a co-conspirator.” United States v. Whiteford,
676 F.3d 348, 357 (3d Cir. 2012). Insofar as William was
concerned, the object of the alleged conspiracy was to get guns
56
William Maxwell moved before the District Court for
judgment of acquittal on this count. We exercise plenary
review over the denial of the motion, although “we view the
evidence in the light most favorable to the government,
mindful that it is the jury’s province (and not ours) to make
credibility determinations and to assign weight to the
evidence.” United States v. Richardson, 658 F.3d 333, 337 (3d
Cir. 2011).
57
The same count also charged a conspiracy to
unlawfully possess a firearm, but, as in the previous section, it
is sufficient for us to concern ourselves with William’s efforts
to transfer a firearm. See supra Section V.D.
95
into the hands of Scarfo and Pelullo, both of whom were
convicted felons.
The evidence supporting that count involved William’s
brother John delivering a firearm from Dallas, Texas, to
Scarfo’s home in Egg Harbor Township, New Jersey. The FBI
recorded multiple wiretapped phone conversations between
John and Pelullo as John made his way to New Jersey. In one
call on September 6, 2007, John expressed his suspicion that
he was being followed by “a chopper over-head” and “a black
and white Suburban [that was] right behind [him] too.” (JAD
at 6156.) They agreed that John should stop for lunch,
presumably to avoid leading the suspected surveillance
vehicles to Scarfo’s house. Later that day, John and Pelullo
spoke again; John said he “talked to Bill [i.e., William
Maxwell] and he[, William,] said it could be everything and it
could be nothing. He said there’s no way of knowing. He
said … just take whatever precautions that you [Pelullo]
thought were best.” (JAD at 6168.) Months later, FBI agents
executed a search warrant at Scarfo’s house in Egg Harbor
Township and uncovered a gun that, according to an ATF
report, John Maxwell purchased from a pawn and gun shop in
Dallas on September 4, 2007.
William Maxwell claims that the only evidence tying
him to the firearm delivery – the call in which John told Pelullo
about his conversation with William – was insufficient to bring
William within the conspiracy to have the firearm transferred
to or possessed by Pelullo or Scarfo. We take that as an
argument that the government failed to furnish sufficient
evidence of the second element of a conspiracy under 18
U.S.C. § 371: that William intentionally joined an agreement
with knowledge of its objective. Whiteford, 676 F.3d at 357.
96
But considering that phone call, as we must, in the light most
favorable to the jury’s verdict, it is enough. United States v.
Richardson, 658 F.3d 333, 337 (3d Cir. 2011). From John’s
statement on the phone that he “talked to Bill” about the
suspected surveillance vehicles (JAD at 6168), a rational trier
of fact could have found that William had knowledge of John’s
illicit objective to deliver the firearm. See United States v.
Caraballo-Rodriguez, 726 F.3d 418, 431 (3d Cir. 2013) (en
banc) (“[A]lthough the prosecution must prove the defendant’s
knowledge of the conspiracy’s specific objective, that
knowledge need not be proven by direct evidence.”). And a
rational jury could also have found, from John’s statement
noting William’s shared concern about the possibility of
surveillance and the advice he gave about the precautions to
take (or at least whose precautions to follow), that William was
in on the agreement. See United States v. McKee, 506 F.3d
225, 241 (3d Cir. 2007) (“A defendant’s knowledge and intent
may be inferred from conduct that furthered the purpose of the
conspiracy.”). Although thin, there was thus sufficient
evidence as to the second element of the charge – that William
intentionally joined the conspiracy, knowing of its objective.58
58
The evidence of the first and third elements of a
conspiracy was also sufficient, and William does not
meaningfully contest those elements. As to the first, the
multiple wiretapped phone calls between John and Pelullo as
John made his way to New Jersey, plus John’s call with
William, supported a finding that an agreement existed for
John to deliver a firearm to Scarfo’s home, where it would be
possessed unlawfully by Scarfo or Pelullo. See United States
v. McKee, 506 F.3d 225, 238 (3d Cir. 2007) (permitting
circumstantial proof of agreement “based upon reasonable
97
2. Convictions for Wire Fraud and
Conspiracy to Commit Wire Fraud59
William Maxwell also disputes the sufficiency of the
evidence supporting his guilty verdict on sixteen counts of wire
fraud and one count of conspiracy to commit wire fraud. Those
counts were predicated on William’s involvement in two
schemes to defraud FirstPlus, namely by causing the company
to pay substantial sums to Pelullo’s and Scarfo’s sham
businesses, and by causing the company to purchase other
Pelullo- and Scarfo-owned businesses at vastly inflated prices.
inferences drawn from actions and statements of the
conspirators or from the circumstances surrounding the
scheme”). And as to the third element, John’s purchase of the
firearm and his cross-country drive to deliver it are certainly
overt acts taken in furtherance of the conspiracy. See id. at 243(“[A]n overt act of one conspirator is the act of all[.]”).
59
Because William Maxwell did not move at trial for a
judgment of acquittal supporting these convictions, we review
for plain error. See supra note 49. We look for “a manifest
miscarriage of justice[.]” United States v. Burnett, 773 F.3d
122, 135 (3d Cir. 2014) (citation omitted). “[T]he record must
be devoid of evidence of guilt or the evidence must be so
tenuous that a conviction is shocking.” Id.Pelullo and John Maxwell purport to adopt William’s
arguments on this issue, but William’s arguments pertain
specifically to his particular conduct supporting the
convictions, and adoptions “that concern an argument specific
to the arguing party will not be regarded[.]” United States v.
Williams, 974 F.3d 320, 374 n.41 (3d Cir. 2020).
98
To prove wire fraud, the government needed to show “(1) the
defendant’s knowing and willful participation in a scheme or
artifice to defraud, (2) with the specific intent to defraud, and
(3) the use of interstate wire communications in furtherance of
the scheme.” United States v. Andrews, 681 F.3d 509, 518 (3d
Cir. 2012) (citation, internal quotation marks, and alteration
omitted). As for the charge of conspiracy to commit wire
fraud, once again that required the government to prove “(1) a
conspiracy existed; (2) the defendant knew of it; and (3) the
defendant knowingly and voluntarily joined it.” United States
v. Wheeler, 16 F.4th 805, 819 (11th Cir. 2021) (citation
omitted). William does not focus his attack on the evidence
supporting any particular element; he instead claims that he
only did “as directed[.]”60 (WM Opening Br. at 34-36.) But
the trial evidence against him belies that attempted evasion.61
There was, for example, plenty of evidence to support
the jury’s finding that William Maxwell participated in the
scheme to defraud FirstPlus by causing the company to funnel
money to Pelullo and Scarfo. Evidence at trial showed that
FirstPlus gave to William, as “Special Counsel,” the authority
“to retain any and all consulting firms, in [his] sole discretion”
and compensated him $100,000 per month plus expenses for
his efforts. (JAD at 1653-56.) With that authority, he retained
60
Specifically, he is referring to the jury’s verdict with
respect to Counts 4 through 16.
61
William Maxwell tries to resist any such conclusion
by pointing to instances in which he provided legitimate legal
services for FirstPlus. But evidence of legal conduct does not
negate the evidence of other, illegal conduct.
99
Seven Hills (Pelullo’s company) pursuant to a consulting
agreement in which Seven Hills was given authority to “run the
entire operation of FirstPlus Financial Group and its
subsidiaries” in exchange for $100,000 per month plus
expenses. (JAC at 3755.) Seven Hills then turned around and
retained LANA (Scarfo’s company), whereby LANA would
receive $33,000 of Seven Hills’s $100,000 per month, plus
expenses, to perform identical duties as Seven Hills, although
it was clear that LANA was not actually going to perform any
of those duties, nor was Seven Hills. William was the one who
made those payments happen: he received monthly expense
reports from Seven Hills and would coordinate and then issue
payments for those expenses by wire transfer on behalf of
FirstPlus from his attorney trust account.
William also disputes the sufficiency of the evidence of
his participation in the purchases of Rutgers and Globalnet.62
But he fails on that score too. When Pelullo bullied Kenneth
Stein into drafting inflated business valuations for Rutgers and
Globalnet, it was actually William Maxwell who signed the
engagement letter formally hiring Stein, with Pelullo operating
behind the scenes. And when Stein was compensated for his
services, the payment came via wire transfer from William’s
law firm account. Moreover, William participated in a
discussion that resulted in the inclusion of a false statement in
FirstPlus’s 10-K regarding its acquisitions of Rutgers and
Globalnet from Seven Hills and LANA. When those deals
came together, Pelullo had lawyers working on both sides of
the transaction. Nevertheless, FirstPlus falsely claimed in its
62
Specifically, he is referring to the jury’s verdict with
respect to Counts 17 through 19.
100
10-K that the acquisitions of Rutgers and Globalnet were
“arms-length” deals, notwithstanding William’s unsupported
assertion to the contrary. (JAD at 2771.)
In sum, evidence of William’s participation in the wire
fraud counts and the wire fraud conspiracy was neither lacking
nor so “tenuous” as to render the convictions “shocking.”
United States v. Burnett, 773 F.3d 122, 135 (3d Cir. 2014). In
fact, it was quite the opposite. His convictions on the wire-
fraud related counts are amply supported by the trial record.
F. Juror Issues63
1. Background
Toward the end of trial and through jury deliberations,
the District Court confronted a number of jury-related
issues, ranging from scheduling concerns to allegations of
juror misconduct.
63
Scarfo and John Maxwell set forth the challenges to
the jury-related issues that are addressed in this section.
Scarfo’s argument was specifically adopted by John Maxwell
and Pelullo – and it effectively includes everything raised by
John – so the challenges to these jury-related issues apply to all
three of those Defendants. William Maxwell specifically
adopted John’s arguments, addressed, infra, in Sections V.F.2
and V.F.5, but not the remaining arguments raised only by
Scarfo, which he has thus forfeited. See supra note 19. We
nonetheless refer to the arguments in this section as belonging
to “the Defendants” for the sake of simplicity.
101
By mid-June 2014, closing arguments in the case were
under way. On the morning of June 16, the Court and parties
anticipated that the summation for one of the defendants,
David Adler, would continue where it had left off the previous
day. Before the jury was brought in, however, the District
Court notified the parties that Juror #8 was “distraught,”
worrying that “her name is known and, therefore, her family’s
name is known.” (JAC at 13557.) The Court expressed its
opinion that Juror #8 should be excused because “[s]he says
she can no longer be fair and impartial.” (JAC at 13557.) The
Court also disclosed that it had spoken with Juror #8 about
similar concerns “three or four weeks ago[,]” and, at the time,
she had expressed a willingness “to try to see [the case] to the
end.” (JAC at 13557.) But Juror #8’s anxiety continued to
grow, and the Court decided that, after she voiced her concerns
again, it “d[id]n’t see any choice but to let her go.” (JAC at
13557.) The government agreed with the Court that Juror #8
should be excused. The Defendants’ attorneys did as well,
though they requested that she be instructed to not tell the other
jurors the reason for her being excused. Their request was
heeded: the Court confirmed with Juror #8 that she had not
expressed her concerns to other jurors, and, when the Court
notified the remaining jurors that Juror #8 had been excused
and an alternate would take her place, it did not explain why.
The Defendants also asked whether a record had been created
to document Juror #8’s concerns, which the Court confirmed
had been done. The trial record includes the transcript of an in
camera conversation with Juror #8 earlier that day, in which
Juror #8 asked to be excused for the same reasons relayed by
the Court to the parties.
The jury started its deliberations two days later, on
June 18. Several days later, another juror had to be excused.
102
Juror #12 had a prepaid vacation starting on June 28, and
pursuant to the Court’s earlier promise to honor all jurors’
prepaid vacation plans, Juror #12 was to be excused on
June 27, a Friday, if the jury was still deliberating. The Court
allowed the parties to choose whether to “go with eleven after
[Juror #12] leaves or [to] substitute alternate number one in her
place.” (JAC at 14000.) On the Tuesday of Juror #12’s last
week, however, the jury asked the Court – and the Court
agreed – to give them Fridays off from deliberations in light of
employment hardships, which moved up Juror #12’s last day
to June 26. The Court then notified the parties of the requested
schedule change and the effect it would have on the jury
composition and deliberations:
[I]t’s the consensus of the jury they not
work Friday at all. Now, obviously that means
juror number twelve’s last day will be
Thursday. … They all understand that if they
don’t have a verdict when 12 leaves, they’re
going to get an alternate in there, have to start
again next week. …
So we’re not working Friday and you
know tomorrow we’re ending early. … It’s tense
in there, which is not unexpected, given the
length of this trial and the issues that they have
to decide. We put a terrible burden on them with
a hundred and seventy questions in the
questionnaire and they seem to be working
through it. But it’s tense and I don’t think you’re
going to have a verdict this week. I could be
wrong, but I don’t think so. That’s just my guess
at this point.
103
(JAC at 14002-03.)
That Thursday, Juror #12’s last day, Scarfo’s and
Adler’s attorneys raised concerns about what the jury believed
would be the effect of Juror #12’s excusal on the jury
composition and its deliberations. Specifically, they were
concerned that the jury’s knowledge of Juror #12’s excusal
would put pressure on them to reach a verdict before she left –
particularly if they knew that, were an alternate to replace her,
their deliberations would have to start anew. Although the
attorneys conceded that an instruction to start deliberations
anew was required once the alternate was seated, see Fed. R.
Crim. P. 24(c)(3),64 they wanted to ensure that the instruction
wasn’t given until the alternate was actually seated, so as not
to put pressure on the jury to reach a verdict before the
replacement occurred. In fact, the attorneys were concerned
that the Court may have already told the jury about starting
anew earlier that week, when the jurors had asked not to
deliberate on Fridays.
Upon hearing those concerns, the Court said it was
“positive [the jurors] know that there will be a substitution”
upon Juror #12’s excusal (JAC at 14018), but it was unsure
whether the jury had been told that seating an alternate would
require their deliberations to begin again. The Court
acknowledged, however, that it likely had instructed the
alternates “that the deliberations would have to start over again
because of a new juror” and that “the new juror has a right to
64
Rule 24(c)(3) provides, in relevant part: “If an
alternate replaces a juror after deliberations have begun, the
court must instruct the jury to begin its deliberations anew.”
104
be heard on all the issues in the case.” (JAC at 14020.)
Scarfo’s attorney then raised another concern: the alternates
may have relayed that message to the jurors while being
transported to and from the courthouse together. The Court
agreed that such conversations were possible but that they
would have violated the daily instruction to jurors and
alternates to not talk about the case. Ultimately, the
Defendants noted for the record their objections “to the extent
that this jury understands at this point that they will be required,
in the event of a substitution for juror number 12, to restart their
deliberations.” (JAC at 14021.) Nevertheless, they
acknowledged there was likely no in-the-moment remedy to
their concerns, and the Court did not attempt to fashion one.
Later that same day, the jury passed a note to the Court:
“We are unanimous on some counts, but we are not unanimous
yet on others. Are we under a time constraint to reach
unanimity?” (D.I. 1115 (single and double underlining in
original).) The Court proposed to the parties that the jury
simply be told it was under no time constraint. The Defendants
supported that idea, but the government requested an
instruction that the jury was allowed to reach a partial verdict.
After some discussions, the Court opted for the shorter answer
and told the jury there was no time constraint. It then excused
Juror #12 for her vacation and sent the rest of the jury home for
the weekend without receiving a verdict. With the jury gone,
the parties agreed to have the Court empanel an alternate juror
the following week instead of allowing an eleven-juror
deliberation.
Before deliberations began the following Monday
morning, Juror #7 had an in camera conversation with the
Court to voice her “frustration” with deliberations because
105
other jurors were “shutting [her] down” when she disagreed
with them. (NSA at 18.) Apparently, the other jurors’ “minds
[were] made up[,]” and they were unwilling to debate certain
issues any further. (NSA at 18, 20.) She further explained that
“two cli[ques]” had arisen among the jury by virtue of the two
different vans that transported jurors and alternates to and from
the courthouse each day. (NSA at 18-19.) She was also
offended when the alternate who was set to replace Juror #12
was told by another juror, “[W]elcome to hell.” (NSA at 19.)
Nevertheless, despite her concerns, she assured the Court,
when asked, that she could remain fair and impartial as the
deliberations continued.
The parties were promptly provided both a transcript of
that in camera conversation and an opportunity to react.
Manno asked the Court to remind the jurors, “as a cautionary
measure,” that they could not discuss the case without all
twelve jurors present and that they faced no time constraint on
their deliberations. But the Court thought the reminders were
unnecessary: a warning was given each day that the jury was
not to discuss the case outside the jury room, and the Court had
told the jurors the prior week, in response to their note, that
they were under no time constraints.65
65
While the parties were on the topic of cliques within
the jury, Scarfo’s attorney disclosed on the record that, over a
month ago, he had seen a juror and an alternate having dinner
together at a nearby restaurant but felt that it “was perfectly
appropriate, given the fact that friendships develop.” (JAC at
14068-69.) On appeal, the Defendants flag that disclosure in a
footnote and point out that the Court “did not inquire into the
nature of the jurors’ outside-the-courthouse relationship” (NS
106
While the parties were all gathered in the courtroom,
Scarfo’s attorney took the opportunity to move for a mistrial,
arguing that the previous week had put pressure on the jury to
reach a verdict before Juror #12’s excusal that would spill over
into further deliberations, forcing the replacement juror to “be
subject to the will of those jurors who are already deliberating.”
(JAC at 14069-72.) The Court denied that motion because the
jury had not delivered any verdicts the prior week and the
Court, upon empaneling Juror #12’s replacement, would
instruct the jury to start deliberations over again. The jury then
came out, and, as promised, the Court empaneled Juror #12’s
replacement and instructed the jury to start its deliberations
anew.66
The Court also distributed twelve clean verdict sheets to
the jurors and allowed them to dispose of any previous sheets
or notes if they wanted to. That evening, the jurors handed
their old verdict sheets to the Court for disposal. Pelullo’s
attorney later expressed concern that the old verdict sheets had
been in the jury room during their Monday deliberations with
the replacement juror and therefore may have influenced the
Opening Br. at 121 n.41), but they do not argue that the Court
committed reversible error.
66
Just before the replacement juror was empaneled,
Pelullo’s attorney objected to the replacement (despite
agreeing to it the previous Friday), asking the Court to exercise
its discretion to allow the existing jury to continue
deliberations with only eleven jurors. The Court overruled the
objection.
107
newly constituted jury. He asked the Court to preserve the old
verdict sheets for the parties to examine, but the Court
explained that they had already been destroyed.
The following morning, Tuesday, July 1, the Court
notified the parties that it had received three more notes from
jurors with upcoming vacation plans, the earliest of which did
not start until July 8. After raising multiple options for
accommodating those plans without losing the jury, the Court
and the parties agreed simply to let deliberations play out for
the week and to defer any decision until the next week, when
the vacations would actually start.67
More jury issues arose on Wednesday, July 2. An
alternate notified the Court in camera of an incident that
occurred the previous afternoon as the jurors were transported
back to their cars. In the transport van, the alternate heard three
jurors discussing one of the Court’s instructions and some facts
in the case. The alternate told them that the conversation was
inappropriate and that they should stop. The three jurors then
whispered for the remainder of the trip, so the alternate could
not make out what they were saying.
67
Scarfo’s attorney raised another concern the next day,
namely that the jury might again feel pressure to reach a verdict
before the next juror’s vacation, given that they had previously
learned after Juror #12’s departure that they had to start
deliberations anew when jurors were replaced by alternates.
He conceded, however, that he could not propose a good
solution to his concern, and the Court did not take any action.
108
The Court relayed that in camera conversation to the
parties and gave them an opportunity to research the issue and
consider possible remedies. The government proposed simply
giving another reminder to the jury that their deliberations must
stay in the jury room. The Defendants, on the other hand,
wanted to question the alternate and the three jurors on the
conversation in the van. They also wanted to question the
entire jury on any other conversations outside the jury room
that occurred during trial and deliberations, and on whether
they formed opinions from those conversations. 68 The
Defendants apparently believed that there were bigger
problems unfolding in the jury room, claiming that the
combination of the conversation in the van and Juror #7’s vocal
frustrations earlier in the week raised the possibility that the
jury was deliberating in separate cliques and not altogether in
the jury room. The Court denied the Defendants’ requests,
concluding that the negative effects of interrupting
deliberations would outweigh the potential benefits of further
inquiry, particularly where the alleged misconduct was only an
intra-jury communication, not an extra-jury influence.
The jury returned its verdict the next day, July 3.
68
Because the Court’s conversation with the alternate
had not been transcribed, the Defendants also requested that it
produce a transcription for all future judge-juror conversations.
109
2. Disclosure of the District Court’s First
Conversation with Juror #869
As noted earlier, the District Court disclosed to the
parties that Juror #8 feared the disclosure of her identity and
potential retaliation, which she voiced to the Court outside the
presence of the parties. The Court’s disclosure came after its
second conversation with Juror #8, so the Defendants now fault
the Court for failing to disclose Juror #8’s concerns after the
first conversation, which occurred “three or four weeks” prior.
(JAC at 13557.) According to the Defendants, they were
“stripped of an opportunity to be heard” when the issue of Juror
#8’s fear first arose. (NS Opening Br. at 155.) They claim
that, had they been given that opportunity, they would have
immediately moved to remove her from the jury. Instead, Juror
#8 continued to serve an additional three or four weeks,
creating what the Defendants describe as an “overwhelming”
“likelihood” that the rest of the jury “learned of Juror #8’s fear
that harm would inevitably come to her or her family upon
rendering a verdict[.]” (NS Opening Br. at 156.) The
Defendants therefore claim that the Court’s initial silence
amounted to a violation of Federal Rule of Criminal Procedure
43, the Due Process Clause of the Fifth Amendment, and the
Confrontation Clause of the Sixth Amendment, since it
effectively prevented them from being contemporaneously
69
We review for harmless error a district court’s denial
of a criminal defendant’s right to be present at every stage of
his or her criminal proceeding. United States v. Toliver, 330
F.3d 607, 611-12 (3d Cir. 2003).
110
involved in their trial proceedings. United States v. Toliver,
330 F.3d 607, 611 (3d Cir. 2003).
The Defendants are correct that they generally have the
“right to be present in the courtroom at every stage of [their]
trial.” Illinois v. Allen, 397 U.S. 337, 338 (1970) (under the
Confrontation Clause); accord United States v. Bertoli, 40 F.3d
1384, 1397 (3d Cir. 1994) (under the Due Process Clause);
Fed. R. Crim. P. 43(a)(2) (“[T]he defendant must be present
at … every trial stage[.]”). But that right is not absolute. While
we have “stress[ed] the advisability of having counsel present
for all interactions between the court and jurors,” United States
v. Savage, 970 F.3d 217, 242 (3d Cir. 2020), “[t]he defense has
no constitutional right to be present at every interaction
between a judge and a juror[.]” United States v. Gagnon, 470
U.S. 522, 526 (1985) (citation and internal quotation marks
omitted). To guarantee an absolute right would run counter to
the “day-to-day realities of courtroom life” because “[t]here is
scarcely a lengthy trial in which one or more jurors do not have
occasion to speak to the trial judge about something, whether
it relates to a matter of personal comfort or to some aspect of
the trial.” Rushen v. Spain, 464 U.S. 114, 118-19 (1983) (per
curiam). Still, “[w]hen an ex parte communication [between
judge and juror] relates to some aspect of the trial, the trial
judge generally should disclose the communication to counsel
for all parties.” Id. at 119.
It may have been less than ideal for the District Court
not to notify the parties of the first communication with Juror
#8 until after speaking with her again three or four weeks later.
The Supreme Court has instructed trial courts to “promptly”
notify the parties after a communication from a juror. Id. at
117 n.2. And it would have been better for the first
111
communication to have been transcribed, which is “our
preference [for] such interactions[.]” Savage, 970 F.3d at 242.
It was on a relevant topic bearing directly on Juror #8’s ability
to remain fair and impartial while she heard evidence. See
Rushen, 464 U.S. at 119 (noting that disclosure is proper when
the communication “relates to some aspect of the trial”).
Although the Defendants’ attorneys did not necessarily need to
be present for Juror #8’s first communication with the Court,
Gagnon, 470 U.S. at 526, the better course would have been to
consult them after the communication and to give them a
chance to participate in the decision-making on how to
proceed. Cf. Toliver, 330 F.3d at 616 (“[B]y not informing
counsel of the jury’s note [requesting a specific transcript]
before responding, the trial judge foreclosed any opportunity
for the defense to argue against submitting the testimony at all,
or at least to argue that the transcript should include relevant
portions of cross-examination.”).
But even if the Court’s delay were seen as error, it was
harmless. Id. at 613. The Defendants’ complaint is that the
delay gave Juror #8 a chance to express her fears to her fellow
jurors and thus infect the entire jury with fearful bias against
the Defendants. But they do nothing more than speculate that
other jurors learned of Juror #8’s fear of retaliation. In fact, the
record supports the opposite conclusion: in response to
concerns raised by the Defendants’ attorneys, the Court
“inquire[d] again as to whether or not [Juror #8] made any
comments to any of the jurors about the reasons why she can’t
continue” and confirmed that Juror #8 “ha[d] not made any
comments at all to other jurors.” (JAC at 13562.) The
Defendants’ “sheer speculation” to the contrary cannot
substantiate their claim that they were harmed by the late
112
disclosure of the first conversation the Court had with Juror #8.
United States v. Provenzano, 620 F.2d 985, 997 (3d Cir. 1980).
3. Purported Coercion of the Jury by the
District Court70
The Defendants question the validity of the verdict in
light of supposed coercion of the jury. In particular, the
Defendants claim that the jury believed it was under time
constraints to reach a verdict after deliberations started, largely
brought on by the forthcoming departure of certain jurors for
their prepaid vacations. According to the Defendants, the jury
believed it would have to start deliberations anew each time a
juror was excused, so the jurors felt rushed to reach a verdict
before more jurors could be excused. Combining that prospect
with the fact that the trial had already lasted months longer than
originally promised, the Defendants say the jury was coerced
by the District Court into reaching its verdict quickly.
It is true that “a trial judge may not coerce a jury to the
extent of demanding that they return a verdict.” United States
v. Jackson, 443 F.3d 293, 297 (3d Cir. 2006) (citation and
internal quotation marks omitted). “We will find a
supplemental charge to be unduly coercive, however, only
where the charge caused the jury to be influenced by concerns
irrelevant to their task and where the jury reached its
70
“In reviewing jury instructions, we consider the legal
standard stated in the instructions de novo, but apply an abuse
of discretion standard as to the specific wording of the
instructions.” United States v. Boone, 458 F.3d 321, 326 (3d
Cir. 2006).
113
subsequent verdict for reasons other than the evidence
presented to it.” United States v. Boone, 458 F.3d 321, 326 (3d
Cir. 2006) (citation, internal quotation marks, and alterations
omitted). Thus, undue coercion from a trial court “generally
involve[s] substantial and explicit pressure from the court for
a verdict or for a particular result.” Id. at 327.
That is why instructions are permissible when they, for
example, merely remind jurors of their oaths or simply explain
that disagreement would result in retrial. Id. at 326-27; cf.
Jackson, 443 F.3d at 298 (coercive charge when the court
“goes further and unduly emphasizes the consequences, i.e.,
time, toil, or expense, that will accompany a failure to arrive at
a[] unanimous verdict”). Similarly, when it comes to jurors’
understanding of the length of deliberations, we have drawn a
distinction between impermissible “affirmative coercive
conduct” by the court – such as reminding the jury of the
approaching weekend – and a permissible failure to address a
question about an approaching holiday. United States v.
Graham, 758 F.2d 879, 883-85 (3d Cir. 1985) (“The
impending holiday of and by itself is an insufficient additional
factor to render the district court’s order for further
deliberations coercive.”).
With respect to the original jury – before Juror #12 was
excused – the Defendants cannot complain of any coerced
verdict. For one, the record does not clearly support the
Defendants’ claim that the jury knew it would have to start
deliberations anew after Juror #12 was replaced. The
Defendants latch onto the District Court’s concession that it
told alternates that the deliberations would start anew if they
replaced a juror, speculating that the alternates relayed that
message to the jurors, in direct contravention of the Court’s
114
order not to discuss the case outside deliberations.71 But we
assume that jurors follow instructions. Francis v. Franklin,
471 U.S. 307, 324 n.9 (1985).
More clear – though still not entirely so – is the District
Court’s statement to the parties that the jurors “all understand
that if they don’t have a verdict when [Juror #]12 leaves,
they’re going to get an alternate in there, have to start again
next week.” (JAC at 14002.) But regardless of the jury’s
understanding of the consequences of Juror #12’s excusal, the
fact remains that it did not return a verdict before Juror #12 was
replaced by an alternate and the jury was instructed to start
over. The Defendants cannot complain about a coerced verdict
when there was no verdict at all at that point. See Jackson, 443
F.3d at 297 (supplemental charges were coercive when they
“caused” the jury to be influenced by irrelevant concerns and
reach a verdict for reasons other than the evidence presented
(emphasis added) (citation omitted)).
After Juror #12 was replaced, the jury may well have
believed that deliberations would have to start anew again if
71
And because the Defendants simply speculate that
alternates told jurors about starting deliberations anew upon a
substitution, we disagree with the Defendants that the Court
had an obligation to conduct a hearing to determine the
existence of improper contact between jurors and alternates.
See United States v. Console, 13 F.3d 641, 669 (3d Cir. 1993)
(holding that “[t]here is no obligation for the judge to conduct
an investigation” if there is no “reason to believe that jurors
have been exposed to prejudicial information” (citation and
internal quotation marks omitted)).
115
another juror was replaced. Even though other options were
available and considered here,72 the jurors saw what happened
after Juror #12 was replaced – the Court instructed them,
pursuant to Federal Rule of Criminal Procedure 24(c)(3),73 to
start over – and they could have “assum[ed] that substitution
was the only option[.]” (NS Opening Br. at 123.) But that
assumption, without more, does not amount to coercion. Other
than complying with Rule 24(c)(3), the District Court
undertook no “affirmative coercive conduct” that would put
pressure on the jury to reach a verdict by a certain deadline.
Graham, 758 F.2d at 885. The Defendants point to no instance
in which the Court imposed any “pressure … for a verdict or
for a particular result.” Boone, 458 F.3d at 327. Without any
other indicia of coercion, the Defendants effectively invite us
to deem a use of Rule 24(c)(3) to be coercive per se, for the
message it sends to a newly constituted jury.74 We decline that
invitation.
72
“The Federal Rules of Criminal Procedure currently
provide courts three options after excusing a juror for good
cause during deliberations: (1) declare a mistrial; (2) proceed
with eleven jurors; or (3) seat an alternate.” United States v.
James, 955 F.3d 336, 346 (3d Cir.) (citation, internal quotation
marks, and alterations omitted), cert. denied, 141 S. Ct. 329(2020).
73
See supra note 64.
74
The Defendants emphasize the lack of evidence that
the jury was not coerced by an understanding that deliberations
would start anew with another replacement. But the burden of
showing error remains with them. See United States v.
116
4. Purported Coercion of the Substituted
Juror by Other Jurors75
The Defendants also complain about a different type of
juror coercion: pressure from other jurors on the alternate who
replaced Juror #12. They claim that the alternate confronted
“outward hostility from the deliberating jurors” just prior to
being empaneled and that the initial jury had already reached
unanimity on certain issues before he joined. (NS Opening Br.
at 133-34.) Together, those supposed facts leave the
Defendants with “little doubt that the Alternate felt pressure to
comply with previously made decisions and acquiesce to the
majority’s previous determinations as to guilt and innocence.”
(NS Opening Br. at 138.) And that pressure was allegedly
reflected in the timing of the verdict, returned three days after
the alternate was empaneled, when contrasted against the seven
days that the original jury deliberated. The District Court’s
decision to empanel the alternate under such coercive
conditions was an abuse of discretion, claim the Defendants,
and so requires reversal.
Juror coercion can indeed arise not only from trial court
instructions but also from other jurors who are forced to start
deliberations anew with an alternate. See Claudio v. Snyder,
Jackson, 443 F.3d 293, 297 (3d Cir. 2006) (“[The defendant]
must show that the Court’s action was ‘arbitrary, fanciful or
clearly unreasonable.’” (citation omitted)).
75
“We review for abuse of discretion a district court’s
decision to dismiss a juror and to impanel an alternate juror.”
United States v. Glover, 681 F.3d 411, 422 (D.C. Cir. 2012).
117
68 F.3d 1573, 1575-77 (3d Cir. 1995); e.g., United States v.
Lamb, 529 F.2d 1153, 1156 (9th Cir. 1975) (en banc). When
an alternate is empaneled after jury deliberations have
commenced, it is not unnatural to worry “that the 11 original
regular jurors may have already made up their minds to convict
and, together, may coerce the alternate juror into joining in
their position.” United States v. Kopituk, 690 F.2d 1289, 1310
(11th Cir. 1982).
But precautions are available to limit that potentially
coercive dynamic. In Claudio v. Snyder, we affirmed the
denial of habeas relief when, in the petitioner’s state-court trial,
an alternate replaced a juror after deliberations had
commenced. 68 F.3d at 1574, 1577. Although the manner of
replacement violated a state procedural rule prohibiting
substitutions after the start of deliberations, we followed our
sister circuits in holding that, as a federal constitutional matter,
such a substitution “does not violate the Constitution, so long
as the judge instructs the reconstituted jury to begin its
deliberations anew and the defendant is not prejudiced by the
substitution.” Id. at 1575, 1577. We concluded in that case
that both requirements were met, noting that the petitioner had
not been prejudiced because alternates were chosen in the same
manner as regular jurors, the alternates and jurors heard the
same evidence and legal instructions, the replacement juror
affirmed that she had not been influenced by outside
discussions or media reports, and the reconstituted jury
deliberated longer than the original jury did. Id.As in Claudio, the record reflects no problematic
coercion here. Upon empaneling Juror #12’s replacement, the
Court instructed the new jury to start its deliberations anew, as
prescribed by Rule 24(c)(3). And, as in Claudio, the alternate
118
juror was selected in the same manner as the regular jurors,
heard the same evidence and instructions,76 and affirmed that
76
Although the Court instructed the newly constituted
jury that all previous instructions (which the alternate heard)
remained in effect, the Defendants nonetheless complain that
the alternate “was not part of the process in formulating
[previous] question[s]” from the jury about answering
interrogatories for the RICO predicate acts, and he therefore
did not understand the Court’s responsive instruction to the
same degree as the other eleven. (NS Opening Br. at 135-36.)
We disagree. The jury’s questions were straightforward: (1)
whether they had to answer each interrogatory or could stop
after finding two were committed, and (2) whether they should
leave an interrogatory blank if they were not unanimous as to
that interrogatory. The Court’s answer was also clear:
Of course you must consider all the
interrogatories and you must attempt to answer
all of them unanimously. All 12 of you have to
agree on at least two predicate or qualifying acts
as to any individual defendant. If you find the
Government has proven beyond a reasonable
doubt two or more predicate or qualifying acts,
then you can find the Government has proven
one of the essential elements of Count one which
is the RICO conspiracy as to that defendant.
Now all 12 of you have to agree on the same
predicate or qualifying act or acts. That is, you
can’t have six agree on one and six agree on
another. All 12 have to agree on each predicate
119
he had not been influenced by external sources. Although the
reconstituted jury here did not deliberate for as long as the
original jury, it still deliberated for three days before returning
a verdict. That amount of time does not persuade us that the
original jurors coerced the alternate into agreeing with the
counts on which they were apparently unanimous before Juror
#12 was excused. See United States v. Oscar, 877 F.3d 1270,
1289 (11th Cir. 2017) (noting that nine-hour deliberations after
empaneling alternates “indicat[ed] that the jury did in fact
renew its deliberations[,]” even though original jury
deliberated “for several days”); cf. Lamb, 529 F.2d at 1156(finding coercion of substitute juror when deliberations of
reconstituted jury lasted 29 minutes).77 And although it may
act you found to have been proven.
(JAC at 13989.) We don’t see what special background
experience was necessary for the alternate to understand what
was asked or what was instructed.
77
The Defendants rely heavily on United States v.
Lamb, 529 F.2d 1153 (9th Cir. 1975), which is distinguishable
not only factually, as noted above, but also legally. The Ninth
Circuit was in that case interpreting an old, since-amended
version of Rule 24(c) that required the court to discharge all
alternate jurors when the jury retired to deliberate. Id. at 1155;
Fed. R. Crim. P. 24(c) advisory committee’s note to 1999
amendment. Further, the Ninth Circuit made explicit that it
relied exclusively on that old version of Rule 24(c) in reversing
the conviction. See Lamb, 529 F.2d at 1156 n.7 (“While we
have noted the obvious coercive effect suggested by the final
deliberative period of only twenty-nine minutes, that is not a
factor contributing to our conclusion in this case. The
120
be true that one juror told the replacement, “[W]elcome to hell”
(NSA at 19), it is not at all plain that the comment was intended
or received as “outward hostility[,]” as the Defendants claim.
(NS Opening Br. at 133.) Tone, facial expressions, and body
language all matter mightily in communication, and we have
none of those to aid us in understanding whether the comment
had an edge or was just a joke. Plus, the lack of any juror issues
over the next three days of deliberations convinces us that the
alternate was not singled out or coerced into a certain verdict,
notwithstanding Juror #7’s earlier-voiced frustration with the
dynamics in the jury room. Our concern here is coercion
specifically aimed at the alternate juror, not general tension in
the jury room, and we find no evidence in the record of such
coercion. Oscar, 877 F.3d at 1289.78
mandatory provision of Rule 24 having been violated, the
period of time during which the substitute juror participated in
the deliberations is essentially irrelevant.”).
78
The Defendants also make much of the fact that the
original jurors could keep their notes from the first
deliberations and did not return their original verdict sheets
until the end of their first full day of deliberations with the
replacement juror. Although it perhaps would have been
“good practice” to confiscate the old notes and verdict sheets
before the newly constituted jury commenced deliberations,
“we cannot say that it is required[,]” United States v. Oscar,
877 F.3d 1270, 1289 n.18 (11th Cir. 2017), or that, as the
Defendants claim, “the substituted alternate would have
naturally felt pressure to play catch up and concede certain
previously made decisions.” (NS Opening Br. at 136.)
121
5. District Court’s Response to Report of
Juror Misconduct79
Finally, the Defendants fault the District Court for not
inquiring, to the degree they wanted, into an alternate’s report
of a discussion about the case among three jurors while being
transported from the courthouse to their cars. As explained
above, the District Court questioned the alternate when he
brought the issue up, then questioned the marshal who was
driving the transportation van, but the Court declined the
Defendants’ subsequent request to allow them to interview the
alternate, the van driver, and the entire jury for any other
communications about the case. As a result, the Defendants
tell us, the District Court was unable to evaluate the full extent
of misconduct and the prejudice to the Defendants, and we, in
turn, are unable to engage in meaningful review of the Court’s
decision and thus must order a retrial.
Generally, “[j]uror questioning is a permissible tool
where juror misconduct is alleged, and we have encouraged its
use in such investigations.” Boone, 458 F.3d at 327. But to
mitigate “intrusion into jury deliberations[,]” “a district court
should be more cautious in investigating juror misconduct
during deliberations than during trial, and should be
exceedingly careful to avoid any disclosure of the content of
deliberations.” Id. at 329. Thus, we require “substantial
evidence of jury misconduct … during deliberations [before] a
district court may, within its sound discretion, investigate the
79
“This Court reviews a trial court’s response to
allegations of juror misconduct for abuse of discretion.”
Boone, 458 F.3d at 326.
122
allegations through juror questioning or other appropriate
means.” Id. Further, as we stated in United States v. Resko,
“there is a clear doctrinal distinction between evidence of
improper intra-jury communications and extra-jury
influences[,]” as the latter “pose a far more serious threat to the
defendant’s right to be tried by an impartial jury.” 3 F.3d 684,
690 (3d Cir. 1993). That distinction exists because, with intra-
jury communications, “the proper process for jury
decisionmaking has been violated, but there is no reason to
doubt that the jury based its ultimate decision only on evidence
formally presented at trial.” Id.The Defendants rely heavily on Resko, where, after a
juror informed a court officer that jurors were discussing the
case during recesses and while waiting in the jury room, the
court discovered that all twelve jurors had engaged in such
discussions. Id. at 687-88. Although the misconduct involved
merely intra-jury communications, we held that it was an abuse
of discretion for the district court to rely solely on a brief
questionnaire asking each juror whether they had discussed the
case (everyone answered “yes”) and, if so, whether they had
formed an opinion from those discussions (everyone answered
“no”). Id. at 691. By stopping there, we held, the district court
left unanswered critical questions about the nature and extent
of those discussions. Id. at 690-91.
But the key difference between Resko – “a difficult
case” in “which our holding [was] limited,” id. at 690, 695 –
and this case is that, here, the evidence of intra-juror
communications was limited to an isolated event among just a
few jurors. In Resko, the triggering complaint came from a
juror who broadly claimed, one week into trial, that jurors
discussed the case. Id. at 687. The court then learned that all
123
jurors engaged in such discussions. Id. at 688. Here, by
contrast, an alternate notified the court of one specific
discussion among three jurors, which occurred over six months
after trial commenced. Given the narrow scope of the
alternate’s allegations, the Court was within its discretion to
question only the alternate and the marshal about the particular
incident, but to deny the Defendants’ requests to question the
entire deliberating jury about all communications dating back
to the start of trial. Cf. Boone, 458 F.3d at 330 (no abuse of
discretion to question only the juror who was allegedly
refusing to deliberate). Further distinguishing this case from
Resko, the alleged misconduct here occurred after deliberations
had begun, when the District Court necessarily was more
hesitant to intrude. Boone, 458 F.3d at 329. It was certainly
within its discretion to consider the potential effect of that
intrusion and so to conduct a more limited and targeted inquiry
into the allegation.
VI. SENTENCING ISSUES
Finally, Pelullo and John Maxwell challenge their
sentences. First, Pelullo argues that the District Court erred
procedurally and substantively in sentencing him to 360
months’ imprisonment.80 Second, Pelullo and John Maxwell
claim that holding them jointly and severally liable for the total
amount of the forfeiture order was improper under the Supreme
Court’s decision in Honeycutt v. United States, 137 S. Ct. 1626(2017). Third, Pelullo challenges the forfeiture of his Bentley
automobile and yacht, contending that the government’s delay
80
Scarfo adopts one of Pelullo’s procedural-error
arguments. See infra note 84.
124
in seeking forfeiture after it seized those assets violated his
statutory and due process rights. While we will vacate the
forfeiture piece of John Maxwell’s sentence and remand for
resentencing, Pelullo has failed to show error on any of his
sentencing claims.
A. Pelullo’s Sentencing Challenges81
Pelullo complains of his thirty-year sentence, although
his crimes exposed him to a potentially lengthier period of
incarceration.82 When reviewing a sentence, we “first consider
whether the district court committed procedural error, such as
‘improperly calculating[] the Guidelines range[,]’” and then
we assess whether the sentence was substantively reasonable.
United States v. Seibert, 971 F.3d 396, 399 (3d Cir. 2020) (first
alteration in original) (quoting United States v. Tomko, 562
81
We review the District Court’s factual findings for
clear error, its interpretation of the guidelines de novo, and its
application of the guidelines for abuse of discretion. United
States v. Seibert, 971 F.3d 396, 399 (3d Cir. 2020); United
States v. Tomko, 562 F.3d 558, 567-68 (3d Cir. 2009) (en
banc).
82
The guidelines recommended a life sentence, but the
District Court could not have set that lengthy a sentence for any
one count because the highest maximum sentence for any of
Pelullo’s convictions was thirty years. U.S.S.G. § 5G1.1(c).
In theory, the Court could have set Pelullo’s individual
sentences on his various counts to run consecutively rather than
concurrently, id. § 5G1.2(b)-(d), which would have authorized
a sentence as high as 445 years.
125
F.3d 558, 567 (3d Cir. 2009) (en banc)). Pelullo insists that the
District Court committed three “significant procedural errors”
in its analysis, and he critiques the substantive reasonableness
of his sentence as well.83 (SP Opening Br. at 106.)
1. Guidelines Sentencing Range
Calculation
Pelullo argues that the Court erred in calculating his
guidelines range, claiming that it applied the over-$14 million
securities fraud loss to punish him for the bank fraud count.84
83
Pelullo adds another objection in his reply brief,
alleging that the District Court failed to conduct his sentencing
in “the proper order[.]” (SP Reply Br. at 39-41.) But he did
not raise that issue in his opening brief, so it is forfeited.
United States v. Pelullo, 399 F.3d 197, 222 (3d Cir. 2005).
84
Scarfo specifically adopts Pelullo’s argument as to
this issue. See supra note 19. The District Court calculated
Scarfo’s total offense level following the same grouping
approach that it took in sentencing Pelullo and reached a level
of 43, the same one that applied to Pelullo. We thus treat
Pelullo’s argument as applying to Scarfo as well. Nonetheless,
that argument fails for the reasons discussed herein, so Scarfo,
like Pelullo, is not entitled to relief.
Scarfo also attributes error to what he says was the
District Court’s failure to “consider either of his sentencing
memoranda[.]” (NS Opening Br. at 183 n.61.) The record
reflects that the Court was unable to review, ahead of Scarfo’s
sentencing hearing, a submission from his counsel that only
came in earlier that day. The Court, however, gave Scarfo’s
126
Those assertions reflect a miscomprehension of the guidelines.
To calculate the guidelines range “[w]hen a defendant
has been convicted of more than one count,” the sentencing
court must assemble closely related counts into what are called
“Groups.” U.S.S.G. § 3D1.1(a). The court then
“[d]etermine[s] the offense level applicable to each Group”
and “the combined offense level applicable to all Groups taken
together[.]” Id. “The combined offense level is determined by
taking the offense level applicable to the Group with the
highest offense level” and then increasing that offense level
based on the number of “Units.” U.S.S.G. § 3D1.4. A Unit is
a sentencing construct that, according to § 3D1.4 of the
guidelines, functions like this: the court “[c]ount[s] as one Unit
the Group with the highest offense level” and adds “one
additional Unit for each Group that is equally serious or from
1 to 4 levels less serious” than the highest-level Group and
“one-half Unit [for] any Group that is 5 to 8 levels less
serious[,]” while “any Group that is 9 or more levels less
serious than the Group with the highest offense level” does not
generate any Units. Id. The total number of Units thus informs
how many extra levels are added to the offense level of the
highest-level Group, based on a formula in § 3D1.4, to arrive
at a combined offense level.85
counsel an opportunity to raise the issues from that
memorandum at the hearing and said that counsel could “put
anything you want on the record and if I can respond, I will.”
(JAF at 6-7.)
85
Specifically, if the total number of Units is 1, no extra
levels are added; if it is 1.5, one level is added; if it is 2, two
127
Here, the District Court split the twenty-four counts of
which Pelullo was convicted into five Groups:
Offense
Group Description
Level
Takeover of FirstPlus and accompanying 86
1 43
securities fraud
2 Bank fraud 23
3 Obstruction of justice 23
4 Extortion 31
5 Firearm transfer and possession 24
Although Pelullo focuses on the fact that his Group 2
convictions had a lower offense level than Group 1, the District
Court correctly looked for the Group with the highest offense
level, consistent with the guidelines’ instructions, and that was
Group 1. See U.S.S.G. §§ 3D1.1(a), 3D1.4. Since all the other
Groups’ offense levels were at least 9 levels below that of
Group 1, the number of Units was just one, which did not
levels are added; if it is 2.5-3, three levels are added; if it is 3.5-
5, four levels are added; and if it exceeds 5, five levels are
added. U.S.S.G. § 3D1.4.
86
While the PSR erroneously calculated Pelullo’s
Group 1 offense level as 42, the District Court applied the
correct level of 43. The sentencing hearing transcript suggests
that the Court mistakenly stated (or a transcription error stated)
a level of 33, but the Court’s calculation of a recommended
sentence of life imprisonment reflects that it understood the
total offense level to be 43.
128
require additional level increases. Id. § 3D1.4. Accordingly,
Pelullo’s total offense level was correctly calculated as 43.
Pelullo’s claim that the District Court somehow cross-
applied the securities-related loss to the bank fraud claim is
spurious. The Court appropriately divided the offenses into
Groups and took the offense level of the highest-scoring Group
– which itself factored in an enhancement for the $14 million
loss FirstPlus suffered – as Pelullo’s total offense level. That
number, “a single offense level that encompasse[d] all the
counts of which [Pelullo was] convicted[,]” U.S.S.G. ch.3, pt.
D, introductory cmt., was then used to generate a single
recommended sentencing range covering all of Pelullo’s
offenses. 87 There was no error in how the District Court
applied the guidelines’ provisions governing cases with
convictions on multiple counts.
2. Loss Amount Enhancement
Next, Pelullo objects to the District Court’s calculation
of the loss amount. The Court adopted the presentence report’s
recommendation and found that the securities fraud offense
Group – on which the Court based the total offense level –
87
After argument, Pelullo brought to our attention
United States v. Okulaja, 21 F.4th 338, 347-50 (5th Cir. 2021),
which addressed whether relevant conduct for which the
defendant was not indicted could be considered in calculating
offense levels. Here, though, the District Court did not rely on
any conduct that was irrelevant to the Group 1 securities fraud-
based offenses that Pelullo was convicted of when determining
the total offense level.
129
resulted in more than $14 million in loss, triggering a 20-level
enhancement under U.S.S.G. § 2B1.1(b)(1)(K). Pelullo claims
that finding a loss amount of more than $14 million was a
factual error, that “he received far less” than $14 million from
his participation in the scheme, and that the calculation did not
account for the benefits he conferred on FirstPlus. (SP
Opening Br. at 113-15, 118-24.) Calculated correctly, Pelullo
says, the loss amount would have instead led to only a 16-level
enhancement.
In theft cases, of which this case is one variety, a court
calculates the offense level by looking to the “loss” to victims,
U.S.S.G. § 2B1.1(b)(1), which the government must prove by
a preponderance of the evidence. United States v. Evans, 155
F.3d 245, 253 (3d Cir. 1998). The court “need only make a
reasonable estimate of the loss.” U.S.S.G. § 2B1.1 cmt. n.3(C).
Here, the District Court chose to calculate the loss by
calculating the change in FirstPlus’s value caused by the
conspirators. FirstPlus started with roughly $10 million in its
bank accounts; received $4.4 million in bankruptcy payments
over the course of the scheme; and had less than $2,000 left
when law enforcement arrived, resulting in a net loss of almost
$14.2 million, once a loan Pelullo made to the company is
taken into account.88 The cash outflows included the millions
88
According to the PSR, the total diminution in the
value of FirstPlus’s accounts was $14,440,798. The
discrepancy between that amount and the nearly $14.2 million
final loss amount is due, it seems, to a $260,000 loan Pelullo
made to the company, for which he received a credit in the loss-
amount calculation. The record is not entirely clear as to how
the $14.44 million diminution was calculated, but no party has
130
that FirstPlus paid to Seven Hills and LANA for low- or no-
value assets, as well as the fraudulent consulting and legal fees
it paid to Seven Hills, LANA, and William Maxwell. Those
losses were supported by testimony and evidence admitted at
trial. Indeed, Pelullo’s own expert witness assumed that the
$14 million amount was correct – describing it as “a
conservative number” for the total amount of money that
“walked out the door” – and Pelullo never presented any
alternative loss calculations. (JAE at 186, 222.)
Pelullo nevertheless challenges that finding by asserting
that the FBI agent who provided evidence of the loss at trial
only accounted for roughly $11.2 million withdrawn from
FirstPlus’s accounts. But any distinction between $11 and $14
million would not help Pelullo, as the guidelines impose a 20-
level enhancement for all thefts of between $9.5 and $25
million. U.S.S.G. § 2B1.1(b)(1)(K); cf. United States v. Isaac,
655 F.3d 148, 158 (3d Cir. 2011) (holding that error in
calculating defendant’s criminal history score was harmless
because “the same Guideline range would have applied” with
the correct number). In any event, because $14 million is a fair
estimate of the amount FirstPlus “actually ended up losing[,]”
United States v. Kopp, 951 F.2d 521, 531 (3d Cir. 1991),
abrogated on other grounds as recognized by United States v.
Corrado, 53 F.3d 620 (3d Cir. 1995), and was backed up by
largely uncontested evidence at trial, we cannot say that the
District Court clearly erred in selecting that figure.
argued that the District Court clearly erred in accepting that
amount as the change in value of FirstPlus’s accounts over the
course of the conspiracy.
131
Pelullo next suggests that he should only have been held
liable for the approximately $2.6 million he personally gained
from the scheme. That theory, though, is a nonstarter, as the
guidelines expressly advise courts to not rely on a defendant’s
gain, unless unable to calculate the victim’s loss. U.S.S.G.
§ 2B1.1 cmt. n.3(B).
Third, Pelullo contends that he was entitled to credit,
and an accompanying reduction in the loss amount, for the
services he provided FirstPlus. While a $260,000 loan that
Pelullo made to FirstPlus was credited as an offset to the total
loss amount, supra note 88, he says his loss amount should
have been reduced further, down to $8.8 million. He rightly
points out that a defendant can have the amount of loss from a
theft reduced by the fair market value of any legitimate services
he rendered to his victim. See U.S.S.G. § 2B1.1 cmt. n.3(E).
At trial, Pelullo sought to establish the value of his work
through the expert testimony of an accountant who calculated
various offsets. The District Court, however, rejected those
calculations, which were based on FirstPlus’s SEC filings from
2007 and 2008 and on the faulty assumption that FirstPlus was
operated as a legitimate business. There was “no question[,]”
as the Court saw it, that the fraudulent SEC filings were “phony
from day one[,]” and so it refused to “credit [the expert’s]
testimony … because he relie[d] on phony information.” (JAE
at 239.) Pelullo offers us no reason to disturb that finding. See
Ramsay v. Nat’l Bd. of Med. Exam’rs, 968 F.3d 251, 261 (3d
Cir. 2020) (findings of fact are only clearly erroneous if they
are “completely devoid of minimum evidentiary support
displaying some hue of credibility” or they “bear[] no rational
relationship to the supportive evidentiary data” (citation
omitted)). And since he could not provide “estimates of the
value of [his] work” other than those based on the fraudulent
132
SEC filings, the District Court properly declined to reduce the
loss amount. United States v. Washington, 715 F.3d 975, 985
(6th Cir. 2013).
Finally, Pelullo also says that his loss amount should
have been reduced to account for business expenses he
incurred while running the company. A defendant may receive
a credit for expenses he incurred while providing “legitimate”
services, “even amid [his] fraudulent conduct[.]” United States
v. Blitz, 151 F.3d 1002, 1012 (9th Cir. 1998) (citation omitted).
He may not, however, receive “a credit for money spent
perpetuating a fraud.” United States v. Whatley, 133 F.3d 601,
606 (8th Cir. 1998). That was the case here, as the takeover of
FirstPlus “was a complete and utter fraud from day one.” (JAE
at 240.) The scheme sought to bleed FirstPlus dry but to keep
the company going just long enough to collect a few more
bankruptcy payments. Any real work Pelullo performed amid
those efforts served solely to give the operation a patina of
legitimacy so as to keep the scheme running. That was no
“service[]” rendered to the company by the conspirators; it was
all just “part of the fraudulent scheme.” United States v.
Lacerda, 958 F.3d 196, 215 (3d Cir. 2020); accord Blitz, 151
F.3d at 1012. The District Court did not err in refusing to lower
the loss amount.
3. Victim Number Enhancement
Pelullo also argues that the District Court erred in
treating each FirstPlus shareholder as a victim of Pelullo’s
offenses. Because FirstPlus had 1,254 shareholders when the
Defendants’ fraudulent scheme took place, Pelullo received a
six-level enhancement for offenses “involv[ing] 250 or more
victims[.]” U.S.S.G. § 2B1.1(b)(2)(C). He claims, however,
133
that the FirstPlus shareholders were not victims, since the
government did not prove that the fraud made them lose money
or made the stock price drop. That argument is spectacularly
wrong.
A victim is “any person who sustained any part of the
actual loss determined under subsection (b)(1).” U.S.S.G.
§ 2B1.1 cmt. n.1. A person counts as a victim if he “suffer[ed]
permanent ‘pecuniary harm,’” which is “harm that is monetary
or that otherwise is readily measurable in money.” United
States v. Smith, 751 F.3d 107, 118 (3d Cir. 2014) (quoting
U.S.S.G. § 2B1.1 cmt. n.3(A)(iii)). FirstPlus’s shareholders
easily fit that definition. After its subsidiary emerged from
bankruptcy, FirstPlus was receiving substantial periodic
payments based on those proceedings. When the Defendants
took over the company, they diverted and appropriated the
funds for themselves, depriving the shareholders “of the
waterfall payments that they were entitled to[.]” (JAF at 44.)
As the District Court observed, once the fraud was revealed,
FirstPlus fell into bankruptcy and its shares were left with “no
value whatsoever.” (JAF at 45.)
Pelullo quarrels with those findings by parsing the
timeline finely. He notes that FirstPlus’s stock price was
higher when he resigned than when he first joined, and he faults
the District Court for failing to compare the stock price before
and after the fraud. Neither of those points acknowledges the
fundamental effect that the fraudulent scheme had on FirstPlus
and its shareholders. The Defendants extracted millions of
dollars from a public company, all the while covering up their
fraud. All “who bought or held stock when the false
information was disseminated by [Pelullo] suffered a loss,”
United States v. Peppel, 707 F.3d 627, 647 (6th Cir. 2013),
134
especially once the scheme rendered FirstPlus “insolven[t]”
and forced it into bankruptcy. (JAF at 45.) No creative
measurement of the stock price at different times, no willful
ignorance of the effect that the misrepresentations had on the
stock price, and no attempts to blame the company’s downfall
on the government’s discovery of the fraudulent scheme can
rewrite reality. Pelullo fails to identify any errors at all, let
alone clear errors, in the District Court’s findings of fact.89
Finally, Pelullo claims that the shareholders
“acquiesce[d]” in the conspirators’ misdeeds. (SP Opening Br.
at 125.) During the Defendants’ tenure, the shareholders let
FirstPlus sue to terminate a trust that allocated more than 50%
of the waterfall payments to them, and they later voted against
issuing dividends. Pelullo says those actions amounted to
acquiescence in the fraudulent enterprise he and his co-
conspirators ran. But people can’t consent to something they
don’t know is happening. The conspirators kept investors in
the dark, hiding Pelullo’s and Scarfo’s involvement, William
Maxwell’s hefty fees, and the sham character of the
89
Pelullo objects that the government only called one
shareholder to testify at trial. That did not prevent the District
Court from also counting as victims the rest of the shareholders
who bought or held stock while the scheme was ongoing.
Other evidence in the record showed that they suffered loss, as
their shares became worthless and they were deprived of their
portion of the waterfall payments. See, e.g., United States v.
Naranjo, 634 F.3d 1198, 1206, 1214 (11th Cir. 2011)
(affirming district court’s “reli[ance] at sentencing on
estimates of the number of victims and amount of losses” based
on investigator’s testimony).
135
transactions FirstPlus was forced to enter. The District Court
did not err in counting FirstPlus’s shareholders as victims.
They obviously were.
4. Substantive Reasonableness
Finally, Pelullo attacks the substantive reasonableness
of his sentence, arguing that the District Court imposed “a 30-
year sentence for what amounted to, at most, a $2,921.14 loss
to [a] bank.” 90 (SP Opening Br. at 109.) That grossly
mischaracterizes and minimizes the nature of Pelullo’s
misconduct. He was found guilty of twenty-four different
offenses that harmed more than 1,000 victims and cost a public
company many millions of dollars. A thirty-year sentence was
eminently reasonable, given the breadth and seriousness of the
criminal conduct of which he was convicted. Pelullo’s
assertion to the contrary has plenty of brass but no merit.
B. Joint and Several Forfeiture Liability
Following Honeycutt91
1. Background
The District Court imposed a $12 million forfeiture
order and held the Defendants jointly and severally liable for
90
Pelullo does not explain how he calculated that
supposed loss amount.
91
When an appellant raises an issue for the first time on
appeal, we review for plain error. United States v. Saada, 212
F.3d 210, 223 (3d Cir. 2000). That holds true even when the
136
the total amount. While this appeal was pending, the Supreme
Court issued its decision in Honeycutt v. United States, 137 S.
Ct. 1626 (2017), holding that 21 U.S.C. § 853(a)(1), a
forfeiture provision similar to the ones relied on by the
government here, did not permit the imposition of joint and
several liability on a defendant for property that he did not
acquire. Pelullo and John Maxwell now argue, for the first
time on appeal, that the imposition of joint and several liability
was erroneous under Honeycutt. 92 They contend that
Honeycutt precludes the imposition of joint and several
liability in a forfeiture judgment. True enough, to a degree, but
only John is entitled to relief. While we accept the
government’s concession that imposing joint and several
liability on John was improper, we conclude that Pelullo – as a
leader of the conspiracy – cannot show plain error in the
District Court’s forfeiture order and, as such, remains liable for
the full $12 million.
issue may have become apparent only with the emergence of
new precedent. See United States v. Nasir, 982 F.3d 144, 160
(3d Cir. 2020) (en banc), cert. granted, judgment vacated on
other grounds, 142 S. Ct. 56 (2021). “Whether the alleged
error is plain is evaluated based on the law at ‘the time of
appellate review[,]’ regardless of whether it was plain at the
time of trial.” Id. (alteration in original) (quoting Henderson
v. United States, 568 U.S. 266, 269 (2013)). The test for plain
error is set forth, supra, in note 49.
92
Although Pelullo separately briefs this issue, he also
specifically adopts arguments made by John Maxwell.
Because neither Scarfo nor William Maxwell specifically
adopt those arguments, they have forfeited them.
137
The indictment contained notices of forfeiture, alerting
the Defendants that the government intended to seek forfeiture
at sentencing if it secured their convictions. 93 During the
forfeiture phase of the proceedings, the jury returned a special
verdict finding that all the sought-after property was subject to
93
The government obtained forfeiture pursuant to 18
U.S.C. §§ 981(a)(1)(C) (permitting civil forfeiture of “[a]ny
property … which constitutes or is derived from proceeds
traceable to[,]” inter alia, a securities fraud conspiracy, wire
fraud, or a wire fraud conspiracy), 982(a)(1) (authorizing
criminal forfeiture of “any property … involved in” a money
laundering conspiracy conviction), and 1963(a)(3) (permitting
forfeiture of “any property constituting, or derived from, any
proceeds which the person obtained, directly or indirectly,
from racketeering activity … in violation of [the RICO
statute]”), as well as 28 U.S.C. § 2461(c) (authorizing criminal
forfeiture where civil forfeiture is permitted in connection with
a criminal offense). Under a number of those provisions, the
government was entitled to the specific property forfeited or,
where that property had been dissipated, to the value of that
property. See Sonja Ralston & Michael A. Fazio, The Post-
Honeycutt Landscape of Asset Forfeiture, DOJ J. Fed. L. &
Prac., Sept. 2019, at 33, 60-61 (noting that 21 U.S.C. § 853(p)
“provides the court authority to forfeit untainted assets in place
of the dissipated tainted assets”); United States v. Bermudez,
413 F.3d 304, 306 (2d Cir. 2005) (“Section 982 … incorporates
by reference the substitute asset provisions of 21 U.S.C.
§ 853[,]” with one exception not raised here.); 18 U.S.C.
§ 1963(m) (permitting substitution where property forfeitable
under § 1963(a) has been dissipated).
138
forfeiture. The District Court then imposed forfeiture money
judgments holding all four Defendants – including Pelullo and
John Maxwell – jointly and severally liable for $12 million,
which it found to be a fair approximation of the “proceeds” of
their crimes.94
2. Honeycutt and Its Progeny
Under the law at the time of the District Court
proceedings, the imposition of joint and several liability was
appropriate, and, sensibly, the Defendants did not object to that
94
Recall that the District Court calculated nearly $14.2
million in loss to the victims of the Defendants’ scheme in
determining their guidelines ranges. That amount is also
reflected in the Court’s order that the Defendants pay the
victims almost $14.2 million in restitution. See United States
v. Leahy, 438 F.3d 328, 338 (3d Cir. 2006) (en banc)
(“Restitution is … a restorative remedy that compensates
victims for economic losses suffered as a result of a
defendant’s criminal conduct.”). The $12 million in forfeiture
ordered by the Court does not conflict with the loss calculation
because forfeiture is measured by the defendant’s ill-gotten
gains, not the loss to the victims. See United States v. Lacerda,
958 F.3d 196, 218 (3d Cir. 2020) (“[T]he purpose of forfeiture
statutes is to separate the criminal from his ill-gotten gains.”
(citing Honeycutt v. United States, 137 S. Ct. 1626, 1631
(2017))). Sentencing ranges generally only take into
consideration the latter. See U.S.S.G. § 2B1.1 cmt. n.3(B)
(“The court shall use the gain that resulted from the offense as
an alternative measure of loss only if there is a loss but it
reasonably cannot be determined.”)
139
aspect of the forfeiture order. While their appeals were
pending, however, the Supreme Court issued its decision in
Honeycutt. The case involved a hardware store manager who
was convicted of conspiring to sell an iodine product from the
store’s stock, all the while knowing it would be used to
manufacture methamphetamine. Honeycutt, 137 S. Ct. at 1630.
The government conceded that the manager “had no
controlling interest in the store and did not stand to benefit
personally” from the sale. Id. at 1630-31 (internal quotation
marks omitted). Still, the government sought forfeiture
judgments against both the owner and the manager in an
amount equal to the store’s total proceeds from the sale of the
iodine product. Id. at 1631. The forfeiture provision at issue,
21 U.S.C. § 853, permitted liability for “any proceeds the
person obtained, directly or indirectly, as the result of” illegal
drug distribution. Id. at 1632 (quoting 21 U.S.C. § 853(a)(1)).
The Supreme Court read that statute as limiting forfeiture “to
property the defendant himself actually acquired as the result
of the crime” – in other words, “tainted property acquired or
used by the defendant[.]” Id. at 1632-33, 1635. It reasoned
that the word “obtain” in § 853(a) “defines forfeitable property
solely in terms of personal possession or use.” Id. at 1632.
Thus, the Supreme Court concluded, because the manager “had
no ownership interest in [the] store and did not personally
benefit from the [iodine product] sales[,] … § 853 does not
require any forfeiture.” Id. at 1635.
Following Honeycutt, we observed in United States v.
Gjeli, 867 F.3d 418, 427 (3d Cir. 2017), that 18 U.S.C.
§§ 981(a)(1) and 1963, two of the provisions relied on here,
“are substantially the same as the one under consideration in
Honeycutt.” Thus, the lessons of Honeycutt apply “with equal
force” to Pelullo’s and John Maxwell’s forfeiture orders, or at
140
least with respect to those statutes.95 Id. at 427-28. Because
their arguments are raised for the first time on appeal, however,
they must meet the test for plain error. See supra note 49.
3. Post-Honeycutt: John Maxwell
We begin with John Maxwell, who was the Chief
Executive Officer and a board member of FirstPlus, albeit in
title only. He was installed in those roles by Pelullo and
William Maxwell. No one could fairly describe John Maxwell
as a “mastermind” of the conspiracy, cf. Honeycutt, 137 S. Ct.
at 1633 (describing, as an example of someone who could be
held jointly and severally liable, a drug dealer “mastermind”
who obtained all the proceeds of a drug distribution scheme),
and our analysis can begin and end with the government’s
concession of plain error and acknowledgement that John’s
role in the conspiracy was “akin to the manager of the hardware
store in Honeycutt[.]” (Answering Br. at 278.) We understand
the government to be agreeing to a remand of John Maxwell’s
case so that the forfeiture order against him can be modified to
allow liability only for the portion of proceeds he actually
obtained. We accept that concession and will remand for
further proceedings.96 On remand, the District Court should
95
We do not decide today whether Honeycutt also
applies to 18 U.S.C. § 982(a)(1), the third basis cited for the
forfeiture orders.
96
As noted, United States v. Gjeli extended the holding
of Honeycutt – where the relevant forfeiture provision applied
to proceeds “obtained … as the result of” an offense – to 18
U.S.C. § 981(a)(1)(C), which permits forfeiture of proceeds
141
calculate how much John “himself actually acquired” due to
his involvement in the schemes. Honeycutt, 137 S. Ct. at 1635.
4. Post-Honeycutt: Pelullo
Pelullo argues that, like John Maxwell, he too should
not have been held jointly and severally liable. Pelullo’s
arguments, however, fail under prong two of plain-error
review: even assuming Honeycutt applies, see supra notes 95-
96, there was no “clear” or “obvious” error. Olano, 507 U.S.
at 734. Unlike the defendant in Honeycutt, Pelullo was a
primary leader and organizer of the FirstPlus scheme,
“call[ing] all the shots.” 97 (JAD at 1552.) He exercised
dominion and control over the entirety of the proceeds reaped
“traceable to” an offense, and 18 U.S.C. § 1963(a)(3), which
covers proceeds “obtained … from” unlawful conduct. United
States v. Gjeli, 867 F.3d 418, 427-28 & n.16 (3d Cir. 2017).
Section 982(a)(1), one of the bases for the forfeiture order here,
permits forfeiture of “property … involved in” an offense. We
need not opine on whether Honeycutt prohibits joint and
several liability under § 982(a)(1), see supra note 95, since the
government has conceded error as to John Maxwell. United
States v. Senke, 986 F.3d 300, 306 (3d Cir. 2021) (accepting
the government’s concession of plain error and remanding for
further proceedings).
97
Relying on extensive evidence introduced at trial, the
government characterizes Pelullo as sitting at the “pinnacle of
[the] criminal enterprise and ma[king] all the decisions about
disbursing its proceeds, including to himself.” (Answering Br.
at 274; see also Answering Br. at 14-16, 19-20.)
142
from the scheme. He gave definitive commands to employees,
directed the disbursement of company funds, and issued
instructions to FirstPlus’s lawyers, accountants, and other
consultants, all of which evidenced his control over the
criminal operation.
The Supreme Court in Honeycutt emphasized the
importance of having an “ownership interest” in or “personal
benefit” from the proceeds of a crime. 137 S. Ct. at 1635. It is
not plainly wrong to interpret Pelullo’s leadership of the
FirstPlus looting, coupled with his supervision of the
individuals who were distributing the stolen funds, as
demonstrating his ownership of or benefit from the proceeds of
the criminal enterprise. It follows that it was not plainly wrong
to interpret Honeycutt as allowing Pelullo to be held jointly and
severally liable.
Pelullo contends that he should only be liable for the
money that ended up in his pocket. But even after Honeycutt,
multiple people can “obtain” the same proceeds over the course
of a crime where they jointly controlled the enterprise. See
United States v. Cingari, 952 F.3d 1301, 1306 (11th Cir. 2020)
(holding that imposition of joint and several liability on
“spouses who jointly operated their fraudulent business” for
the full proceeds of their scheme was not plainly erroneous).
Thus, as someone who controlled the criminal enterprise,
Pelullo can be held jointly and severally liable for funds that
he did not walk away with.
That others may have also benefited from the proceeds
in question does not mean the District Court plainly erred in
holding Pelullo liable for the entire amount. Again, he
personally benefited from and exerted control over those funds,
143
which is the type of conduct that the Supreme Court indicated
can give rise to forfeiture liability. While we decline to make
here any definite statement about who is subject to joint and
several liability for the entirety of the proceeds of a criminal
scheme under Honeycutt, any error in Pelullo’s sentence in this
regard was not plain, and he is therefore not entitled to relief
from the forfeiture order.
C. Delay in Forfeiture of Pelullo’s Property
During its investigation, the government seized a yacht
and a Bentley automobile that it believed Pelullo and Scarfo
acquired with the proceeds of their criminal enterprise. It did
not seek to formally acquire title to those assets until three
years later, when it requested their forfeiture as part of the
indictment. Pelullo objects to that delay as violating both the
Civil Asset Forfeiture Reform Act of 2000 (“CAFRA”) and the
Fifth Amendment’s Due Process Clause. But he gave up his
rights under CAFRA, and the government’s delay in initiating
a criminal forfeiture proceeding was not so unreasonable as to
violate due process, so he is not entitled to relief.
1. Background
In May 2008, FBI officials executed two warrants
authorizing them to seize the yacht “Priceless,” which was
docked in a marina in Miami, and Pelullo’s 2007 Bentley
automobile, which was also in Miami at the time. The officials
obtained those warrants based on affidavits alleging that the
yacht and Bentley had been purchased with the proceeds of
Scarfo’s and Pelullo’s unlawful activities at FirstPlus. The FBI
then immediately turned the yacht – which it valued at
$850,000, the price for which the vessel was purchased – over
144
to the United States Marshals Service. The Marshals Service,
in turn, contracted with a private company to maintain the
yacht.
A few days later, attorney Mark Cedrone – who briefly
represented Pelullo before the District Court – wrote to the
government on behalf of PS Charters, a company that Scarfo
and Pelullo had set up to conceal their ownership of the yacht.
Cedrone “demand[ed] the immediate return of [the yacht] to
PS Charters[,]” claiming that the vessel was acquired for
legitimate business use and that the seizure “deprived PS
Charters of the opportunity to further its … business as
planned[.]” (D.I. 662-10 at 2.)
As the government showed at trial, however, that was
not true. PS Charters was owned by Seven Hills and LANA
and was set up to allow Pelullo and Scarfo to buy the boat for
their own personal use, while avoiding detection. Although PS
Charters nominally owned the yacht, Pelullo had a financial
interest in the ship through Seven Hills, which owned a fifty-
fifty interest in PS Charters with LANA. Pelullo controlled
Coconut Grove Trust – of which his children were nominally
beneficiaries – which owned Seven Hills.
In response to Cedrone’s letter, the government
informed Cedrone that it was prepared to file a civil action to
seek forfeiture of the yacht but that Pelullo would have to
submit to civil discovery, including a deposition. Cedrone then
changed course and said that, while his client was still
“considering judicial action[,]” “it would seem to be in
everyone’s interests that at least the [yacht] be sold and we can
145
then later fight about the proceeds.” 98 (D.I. 700-1 at 4).
Pelullo’s trial counsel later admitted before the District Court
that it was “possibly right” that Cedrone “didn’t [want] to
submit” Pelullo to depositions and that he “kind of backed off”
his request for the return of the yacht.99 (JAB at 3913-14.)
That was the end of the dialogue between Cedrone and
the government until the following year, when the government
“called him and advised him that the boat was actually totaled.”
(JAB at 3914.) “Totaled,” as Pelullo’s trial counsel put it, was
not an exaggeration. While the precise chain of events is
unclear, the yacht suffered irreparable damage to its engines
when, in July 2009, it sank following maintenance undertaken
during the third-party contractor’s possession. The
government then negotiated a $450,000 insurance payout,
which was substituted for the ship during the forfeiture
proceedings. See supra note 93.
When the government obtained the indictment in 2011,
it included five criminal forfeiture allegations against Pelullo
and some of the other Defendants, each associated with
98
Cedrone also acknowledged that he was representing
PS Charters (this time, along with Seven Hills) “in connection
with the Government’s seizure of … the Bentley automobile[,]”
but he did not express any desire for the return of the car. (D.I.
700-1 at 4.)
99
Particularly in light of that concession, Pelullo’s
claim that “the Government did absolutely NOTHING in
response” to “Cedrone’s requests” is an obvious misstatement
of the record. (SP Opening Br. at 212.)
146
specific counts. The allegations all requested the forfeiture of
the proceeds of those offenses, which included the yacht and
the Bentley, as well as an airplane, jewelry, and the contents of
various bank accounts.
After Cedrone’s initial dialogue with the government,
Pelullo did not press his claim for return of the yacht or pursue
any judicial action until more than five years later. In
September 2013 – on the eve of trial – Pelullo filed a motion
for the return of his property pursuant to Federal Rule of
Criminal Procedure 41(g), seeking the Bentley, a 50% interest
in the yacht, and certain cash, several computers, and FirstPlus
stock. The District Court denied the motion, finding that
Cedrone had waived “any rights that [Pelullo] had” to a prompt
initiation of a civil forfeiture action by failing to “follow up”
after his initial communications with the government.100 (JAB
at 3930.)
The Court completed the criminal forfeiture process
after the Defendants were convicted. It held a separate
forfeiture proceeding, at the conclusion of which the jury found,
beyond a reasonable doubt, that the property referenced in the
indictment – including the yacht and the Bentley – was subject
to forfeiture.
100
The District Court also found that Pelullo failed to
demonstrate an ownership interest in the yacht. The
government does not rely on that finding in defending the
Court’s decision, “[i]n light of the trial evidence regarding
Pelullo’s control of Seven Hills and the Coconut Grove
Trust[.]” (Answering Br. at 249 n.56.)
147
2. CAFRA101
Pelullo asserts that he was entitled to the protections of
CAFRA, 18 U.S.C. § 983 et seq. That statute governs
nonjudicial forfeiture, a process that allows the government to
obtain title to seized property without any involvement by the
courts, as long as it gives affected parties timely notice and no
one comes forward to claim an interest in the property.
Langbord v. U.S. Dep’t of Treasury, 832 F.3d 170, 182 n.4 (3d
Cir. 2016) (en banc); see also 18 U.S.C. § 983(a)(1)(A)(i),
(a)(2)(B); 19 U.S.C. §§ 1607(a), 1609. If someone does
contest the seizure, the government must then promptly initiate
a civil or criminal judicial forfeiture proceeding and obtain a
court order to allow title to pass to the United States. 18 U.S.C.
§ 983(a)(3). Pelullo argues that the government violated
CAFRA’s deadlines for giving notice of a forfeiture and
initiating a forfeiture action.
But that claim comes too late. Pelullo waived any rights
he may have had under CAFRA, just as the District Court said.
See United States v. Desu, 23 F.4th 224, 231 (3d Cir. 2022)
(“Waiver is an ‘intentional relinquishment or abandonment of
a known right.’” (citation omitted)). The government
represented, and Pelullo does not argue otherwise, that it was
prepared to initiate judicial forfeiture proceedings when,
through counsel, PS Charters demanded the yacht. As soon as
the prospect of Pelullo facing discovery in a civil forfeiture
101
We review for clear error the District Court’s factual
determination of waiver. See Resol. Tr. Corp. v. Forest Grove,
Inc., 33 F.3d 284, 285 (3d Cir. 1994); Bermuda Exp., N.V. v.
M/V Litsa (Ex. Laurie U), 872 F.2d 554, 562 n.7 (3d Cir. 1989).
148
action arose, however, PS Charters decided to “back[] off” and
to consent to the government not filing any action. (JAB at
3913-14, 3921.) It was not until five years later that Pelullo
himself demanded the return of the property. He offers no
basis for disturbing the District Court’s finding that his actions
constituted a waiver of his rights under CAFRA. 102 PS
Charters was Pelullo’s tool.103 After employing it to, in effect,
ask the government not to initiate civil forfeiture proceedings,
Pelullo cannot now complain that the government’s failure to
file an action violated his rights.104
102
Pelullo does not address the legal significance of
Cedrone’s discussions with the government except to call
them, without explanation, “a complete red herring[.]” (SP
Reply Br. at 47-48.)
103
In so recognizing, we are not engaged in an ersatz
corporate veil-piercing. Rather, Pelullo admits that PS
Charters was his tool by asserting that Cedrone was really
acting on his behalf in requesting the return of the yacht. How
much PS Charters was also under Scarfo’s control is not a
question before us.
104
Pelullo also points to Department of Justice policy
statements that set internal deadlines for bringing a judicial
forfeiture action. But the government’s internal policies, such
as its Asset Forfeiture Policy Manual, do not “create
enforceable rights for criminal defendants[,]” so Pelullo would
not be entitled to relief even if the government failed to abide
by its own rules. United States v. Wilson, 413 F.3d 382, 389
(3d Cir. 2005).
149
3. Due Process105
Pelullo also claims that the government’s “indefinite” –
actually, forty-two-month – “retention of property” between
the seizure and the filing of the criminal indictment “trampled
upon” his right to due process. (SP Opening Br. at 219.)
When the government seizes property, it cannot hold it
forever. Rather, due process requires that it afford a property
owner a judicial hearing without “undue delay.” United States
v. Eight Thousand Eight Hundred & Fifty Dollars ($8,850) in
U.S. Currency, 461 U.S. 555, 564 (1983). Borrowing from
jurisprudence under the Speedy Trial Clause of the
Constitution, we take a “flexible approach” in assessing the
reasonableness of a delay in filing a forfeiture action, looking
to (1) the length of the delay, (2) the reason for it, (3) the timing
of the claimant’s assertion of his rights, and (4) any prejudice
to the claimant caused by the delay. Id. at 562, 564 (citing
Barker v. Wingo, 407 U.S. 514, 530 (1972)). No one factor is
dispositive, as they are all merely “guides” in helping us
balance the competing interests of the claimant and the
government to determine whether “the basic due process
requirement of fairness” has been met. Id. at 565.
The substantial length of the delay here – almost forty-
two months between the seizure of the yacht and Bentley on
May 8, 2008, and the grand jury’s issuance of the indictment
105
We review the District Court’s factual findings for
clear error and its analysis of whether Pelullo’s due process
rights were violated de novo. Burkett v. Fulcomer, 951 F.2d
1431, 1437-38 (3d Cir. 1991).
150
on October 26, 2011 – decisively favors Pelullo, a conclusion
the government does not dispute. See id. at 565 (deeming delay
of eighteen months “quite significant”).
On the second factor, Pelullo contends that the
government’s reason for that delay was “simple [g]overnment
failure to take any required action[.]” (SP Opening Br. at 217.)
The government responds that the timing of the indictment was
not the product of bad faith or frivolous concerns, but rather
the complexity of the criminal case and the “substantial tasks
facing the prosecutors after the warrants were executed.”
(Answering Br. at 263.) The government has the better of that
argument.
Although the pendency of criminal proceedings “does
not automatically toll the time for instituting a forfeiture
proceeding[,]” $8,850, 461 U.S. at 567, the government may
often have good cause to wait to seek forfeiture as part of a
criminal prosecution rather than pursuing a separate civil
forfeiture proceeding in advance of an indictment. A civil
action could “substantially hamper” the prosecution by
“serv[ing] to estop later criminal proceedings” or “provid[ing]
improper opportunities for the claimant to discover the details
of a contemplated or pending criminal prosecution.” Id.Saving the forfeiture claim for the criminal proceeding may
help a claimant too: “[i]n some circumstances, a civil forfeiture
proceeding would prejudice the claimant’s ability to raise an
inconsistent defense in a contemporaneous criminal
proceeding.” Id. Those are serious concerns, and we are hard-
pressed to say that the government’s reason for choosing the
criminal-forfeiture route was an improper one.
151
That is especially true given the complexities of the
criminal proceedings here. We have no doubt that it took
considerable time for the government to process all the data it
seized from various searches, select the appropriate criminal
charges for the co-conspirators, and draft the resulting 25-
count, 107-page indictment. There is also no indication in the
record that the government failed to pursue its investigation
with diligence or intentionally delayed in securing an
indictment. See $8,850, 461 U.S. at 568; cf. United States v.
Velazquez, 749 F.3d 161, 186 (3d Cir. 2014) (finding that
second factor cuts “strongly” in defendant’s favor due to
government being “strikingly inattentive” in bringing
defendant to trial). We thus cannot say that the reasons for the
delay are inadequate and favor Pelullo.
Pelullo fares even worse on the third factor – the timing
of the claimant’s assertion of a right to judicial review of the
seizure – since he initially invoked his rights and then changed
his mind and backed off the request. As discussed above,
Pelullo waived his rights by agreeing through counsel that the
government need not immediately initiate judicial forfeiture
proceedings. He then did nothing for five years and only filed
a motion to get the property back roughly two years after he
was indicted. His contention that he “asserted [his right] from
the very outset of the seizure” cannot be squared with the
record. (SP Opening Br. at 217.)
That inaction weighs heavily against him when
considering whether a due process violation occurred.
Specifically, a defendant’s failure to file a Rule 41(g) motion
or, “[l]ess formally,” request the return of his seized property
“can be taken as some indication that [the defendant] did not
desire an early judicial hearing.” $8,850, 461 U.S. at 569; cf.
152
United States v. Ninety Three Firearms, 330 F.3d 414, 424-26
(6th Cir. 2003) (finding no due process violation where the
claimant’s “sole attempt to regain his property consisted of a
letter he filed shortly after the seizure”).
Finally, as to the fourth factor, Pelullo claims prejudice
by arguing that, “because of the [g]overnment’s dilatory
conduct[,]” he “lost” a number of “key witnesses” – mainly
various FirstPlus-affiliated officers and attorneys – who could
have aided in his defense but passed away prior to his
indictment. (SP Opening Br. at 221.) Pelullo provides a list of
those individuals, along with their titles and connections to him
or FirstPlus, but he fails to identify what admissible evidence
he could have elicited from any of those persons to help his
case. His conclusory claims that certain witnesses would have
been “key” or “provide[d] information favorable to the defense”
on certain issues are insufficient to establish prejudice.106 (SP
Opening Br. at 102-03.) See United States v. Childs, 415 F.2d
535, 539 (3d Cir. 1969) (finding no “prejudicial delay
whatsoever” from deceased and unavailable witnesses because
106
Pelullo also suggests that the seizure of his assets left
him unable to hire his counsel of choice. The Supreme Court,
however, has held that neither the Fifth Amendment nor the
Sixth Amendment prevents the government from seizing, prior
to trial, assets that a defendant “might have wished to use to
pay his attorney.” United States v. Monsanto, 491 U. S. 600,
616 (1989). Moreover, even if we were to agree with Pelullo
on his point, the overall balance of the factors – particularly the
reason-for-delay and timely-assertion-of-rights factors –
would still tilt the balance decisively against him.
153
defendant did not show how their testimony would have been
material to his defense).
In sum, the balancing of factors precludes a
determination that Pelullo’s due process rights were violated.
But our conclusion that Pelullo has not made out a due process
violation should not be read as approval of the government’s
conduct in this case. While the yacht sat in the custody of a
third party to whom the Marshals Service had entrusted it, it
sank and suffered irreparable damage. At that point, the United
States had not formally secured title to the vessel – nor had any
forfeiture proceeding even begun. Though the cause of the
boat’s loss is not clear from the record, the government is left
in a very poor light. It ought to go without saying that seized
property must be properly cared for. The government may
ultimately prevail in forfeiture proceedings and then may
dispose of the property in whatever lawful way it deems fit.
But there is no guarantee that it will prevail. To ensure that
property owners’ interests are not wiped out before a hearing,
it is critical that the government exercise appropriate diligence
to prevent any destruction of not-yet-forfeited property. Cf.
Logan v. Zimmerman Brush Co., 455 U.S. 422, 434 (1982)
(“[T]he State may not finally destroy a property interest
without first giving the putative owner an opportunity to
present his claim of entitlement.”). It utterly failed in that
responsibility in the case of the yacht “Priceless,” so the more
accurate name of the vessel turned out to be “Half-Priced.”
That is a consequential breach of duty and should not pass
unnoticed.
Despite that, under the relevant framework and the
arguments presented to us, we cannot say that the delay in
initiating forfeiture proceedings deprived Pelullo of “the basic
154
due process requirement of fairness[.]” $8,850, 461 U.S. at
565. As a result, his challenge fails.107
VII. BRADY ISSUES
Finally, Scarfo and Pelullo raise issues relating to the
government’s disclosure obligations. Scarfo says he should
have had a chance to move for a new trial based on “new”
evidence from a separate case that he believes was material
here, and Pelullo claims that the government withheld evidence
that one of its key witnesses at trial was under investigation at
the time. Neither argument is persuasive.
107
Pelullo also summarily argues that he is entitled to
compensation for the seizures and the return of his assets. He
cites virtually no authority for that proposition. The one source
he does reference, 28 U.S.C. § 2465(b), is irrelevant; it only
applies to civil forfeiture proceedings in which the claimant
“substantially prevails[.]” Because Pelullo has not adequately
developed the issue for our review, we will not attempt to sua
sponte discern any potential legal bases for granting him the
relief he seeks. See Nara v. Frank, 494 F.3d 1132, 1133 (3d
Cir. 2007).
He also claims, again without citing authority, that the
Bentley and the firearms found on the yacht should not have
been admitted into evidence. He argues they were unlawfully
seized, but he does not identify any viable basis for deeming
the seizures unlawful or explain why, if the seizures were
infirm, any legal violation required exclusion of that evidence.
155
A. Denial of Scarfo’s Request to File a Motion
for a New Trial Pursuant to Rule 33(b)108
Scarfo challenges the District Court’s denial of his post-
trial request for leave to file a motion for a new trial pursuant
to Federal Rule of Criminal Procedure 33. His request
explained that his proposed motion was based on purported
Brady violations and new information that only surfaced after
trial. The “new information” consisted of certain witness
statements taken prior to the trial and pursuant to an unrelated
investigation of human-trafficking activity, an investigation
that was ultimately prosecuted in the United States District
Court for the Eastern District of Pennsylvania (the “Botsvynyuk
case”).109 See generally United States v. Churuk, 797 F. App’x
680, 682 (3d Cir. 2020) (summarizing that prosecution).
Scarfo and his codefendants wanted access to those witness
statements, memorialized on FBI forms known as 302s,
because they might mention Pelullo. 110 And, because of
108
The standard of review associated with this motion
is discussed herein.
109
The government, for its part, first learned about the
witness statements when Pelullo’s attorney notified the
government that he had received the documents from a defense
attorney in the Botsvynyuk case. Prosecutors then obtained
copies of the statements from their counterparts in the Eastern
District of Pennsylvania before furnishing them to the District
Court here for in camera review.
110
“The FD-302, commonly referred to simply as a
‘302’, is the form … used by FBI agents to summarize
156
Pelullo’s involvement in the human trafficking, the Defendants
thought the documents might in turn show criminal conduct by
Cory Leshner – Pelullo’s “right hand man” and later a key
government witness – and therefore provide helpful
impeachment evidence. (D.I. 1237 at 12-13.)
Pelullo thus filed a sealed motion to compel disclosure
of the 302s, and Scarfo filed a motion to subpoena the
documents pursuant to Federal Rule of Criminal Procedure
17.111 After reviewing the 302s in camera – and entertaining
witnesses’ statements and interviews.” United States v.
Lacerda, 958 F.3d 196, 218 n.7 (3d Cir. 2020). Apparently
Pelullo was involved with one of the companies that hired the
human-trafficking victims in the Botsvynyuk case, but the
investigation there did not uncover any evidence that Pelullo
was complicit in the violations. When trial in that case was
approaching, a defense attorney – Mark Cedrone, who had
represented Pelullo in earlier stages of this case – may have
intended to allege that Pelullo was responsible for employing
the victims, so, for purposes of discovery, government
attorneys put together a file of all documents containing
Pelullo’s name. Pelullo’s attorney here “had the opportunity
to review a portion of the 302 reports [produced by the
government] and take notes on relevant details set forth
therein” (D.I. 1237 at 5), but the Defendants wanted to have
their own copies of the entire file.
111
As the government points out, a subpoena pursuant
to Rule 17 was likely an improper mechanism for obtaining the
sought-after information. That rule provides, in relevant part,
“The court may direct the witness to produce [books, papers,
157
multiple rounds of briefing plus a hearing – the District Court
denied the motions as seeking irrelevant and non-exculpatory
information and because the 302s never mentioned Leshner.
The Court also made clear that it would not entertain any more
motions from the Defendants before sentencing.
Scarfo then requested leave to move for a new trial.112
The District Court denied the request as “probably untimely”
and because the 302s simply did not contain the information
claimed by Scarfo. (D.I. 1281.) It is that decision – not the
previous decision denying Scarfo’s Rule 17 motion to
documents, data, or other objects the subpoena designates] in
court before trial or before they are to be offered in evidence.”
Fed. R. Crim. P. 17(c)(1). It is “not intended to provide a
means of discovery for criminal cases” but rather “was
designed to expedite a trial by providing a time and place
before trial for the inspection of the subpoenaed materials.”
United States v. Amirnazmi, 645 F.3d 564, 595 (3d Cir. 2011)
(citations, internal quotation marks, and alterations omitted).
112
Scarfo claimed that his motion was
based upon new information that surfaced post-
trial, related to the (1) the investigation in United
States v. Botsvynyuk, (2) the Pelullos, (3) the
Leshners, (4) Frank McGonigal, (5) Ken Stein,
(6) Gary McCarthy, and (7) Howard Drossner,
and all mentioned parties’ ties to use of
indentured servitude by and through various
related cleaning companies.
(D.I. 1280 at 2 (footnotes omitted).)
158
subpoena the 302s – that Scarfo now challenges on appeal.113
He concedes that he has “struggled to identify applicable
precedent related to a court’s failure to consider a motion for
new trial[,]” but he still believes that the District Court’s denial
of leave to file the new-trial motion violated his constitutional
rights. (NS Opening Br. at 176.)
In many contexts, we have adhered to an abuse-of-
discretion standard of review when evaluating a challenge to a
district court’s denial of a request for leave to take some step
in litigation. See, e.g., Talley v. Wetzel, 15 F.4th 275, 285 n.6
(3d Cir. 2021) (leave to amend complaint); Jones v.
Zimmerman, 752 F.2d 76, 78 (3d Cir. 1985) (leave to proceed
in forma pauperis); In re United Corp., 283 F.2d 593, 594-96
(3d Cir. 1960) (leave to file untimely statement of objections
to an agency decision). The same deference should be afforded
to district courts that find it necessary to prohibit further
motion practice when issues have been aired and the time has
come to move on. Cf. Pierce v. Underwood, 487 U.S. 552, 558
n.1 (1988) (“It is especially common for issues involving what
can broadly be labeled ‘supervision of litigation,’ … to be
given abuse-of-discretion review.”); United States v.
Sheppard, 17 F.4th 449, 454 (3d Cir. 2021) (“Underlying our
review for abuse of discretion are the principles that: 1) a
district court may have a better vantage point than we on the
Court of Appeals to assess the matter, and 2) courts of appeals
apply the abuse-of-discretion standard to fact-bound issues that
are ill-suited for appellate rule-making[.]” (citations and
internal quotation marks omitted)).
113
The government’s arguments on the merits of
Scarfo’s Rule 17 motion are therefore irrelevant.
159
Scarfo does not raise any basis for concluding that the
District Court abused its discretion in denying his request, nor
do we detect any. He does not dispute the District Court’s
conclusions that a motion for a new trial would likely be
untimely and that the 302s did not contain the information he
claimed they did. Nor does he dispute that the Court had
already entertained “an extraordinary number of written
motions” (D.I. 1281 at 1) – including more than a half-dozen
after trial. Instead, he simply summarizes his attempts in the
District Court to procure the 302s, then concludes that he
“seeks remand for consideration of his motion for new trial
under Rule 33(b), given the facts set forth herein[.]”114 (NS
Opening Br. at 181.) Because he fails to demonstrate that the
District Court’s denial of leave was “arbitrary or irrational” or
rested upon “a clearly erroneous finding of fact, an errant
conclusion of law or an improper application of law to fact[,]”
Scarfo has not shown an abuse of discretion. United States v.
114
The one case Scarfo does cite, Ogden v. United
States, 112 F. 523 (3d Cir. 1902), predates the adoption of the
Federal Rules of Criminal Procedure, which impose a “rigid”
time limit on motions for new trials. Eberhart v. United States,
546 U.S. 12, 13 (2005). It is also factually distinguishable: the
defendant there moved for a new trial immediately following
the verdict based on undisputed evidence of extraneous
influences on the jury, while Scarfo joined in three prior new-
trial motions and does not dispute that the documents he sought
would not have given him the information he wanted. Ogden,
112 F. at 524-25.
160
Gonzalez, 905 F.3d 165, 195 (3d Cir. 2018) (citation
omitted).115
B. Pelullo’s Motion for Remand Based on Giglio
Evidence116
Unbeknownst to the Defendants or the District Court,
Robert O’Neal – the FirstPlus chairman, who flipped and
115
We remain cognizant of the countervailing due
process interests in having one’s arguments heard in court.
One can imagine a scenario in which a party is cut off too soon
and is precluded from making an argument essential to its case.
Accordingly, we encourage district courts to exercise
discretion cautiously in the face of such countervailing
interests. Still, wherever the outer bounds of that discretion
may be, the District Court was well within them here.
116
We do not apply a standard of review in the typical
sense, since Pelullo could not have raised this issue – which
first came to the parties’ attention while this appeal was
pending – before the District Court. Rather, we look to the
burden of proof applicable to Brady and Giglio claims, as
discussed herein.
Pelullo bases his motion on 28 U.S.C. § 2106, which
provides that, when reviewing a decision on appeal, we “may
remand the cause and … require such further proceedings to be
had as may be just under the circumstances.” Wiwa v. Royal
Dutch Petroleum Co., 392 F.3d 812 (5th Cir. 2004). “Section
2106 grants us broad power when it comes to how best to
dispose of a matter under our review.” Id. at 819. Where a
remand to the district court “would be an exercise in futility[,]”
161
testified for the government at trial – was himself under
investigation in an unrelated criminal matter in the Western
District of Texas while trial in this case was underway. That
investigation culminated in O’Neal’s indictment in December
2020, which the government brought to the Defendants’
attention a few months later, after it had been unsealed. Pelullo
now asks us to remand his case to the District Court so that he
can seek an evidentiary hearing and move for a new trial
pursuant to Rule 33 based on what he says was the
government’s failure to disclose exculpatory evidence in
violation of Brady v. Maryland, 373 U.S. 83 (1963), and Giglio
v. United States, 405 U.S. 150 (1972).117 We decline to grant
such relief.
According to his indictment, O’Neal ran chiropractic
clinics in Texas and received millions of dollars in illegal
kickbacks from hospitals and other healthcare providers,
payments that he disguised as marketing fees and shared with
we may “make a complete disposition of the case” ourselves
rather than having the District Court consider the matter in the
first instance. Id.; Beck v. Reliance Steel Prods. Co., 860 F.2d
576, 581 (3d Cir. 1988).
117
The other Defendants all join in Pelullo’s motion. In
a second motion filed nearly a year after his original one,
Pelullo makes the same arguments but also says we should
dismiss the indictment against him with prejudice or order the
District Court to do so. He offers no support for that
extraordinary demand. Nor could he; the remedy for a Brady
or Giglio violation is a new trial, not dismissal. Giglio v.
United States, 405 U.S. 150, 153-55 (1972).
162
certain co-conspirators. 118 The indictment charged that,
beginning in 2008 and continuing through 2013, O’Neal
conspired with others to defraud the government and to solicit
and collect healthcare kickbacks, in violation of 18 U.S.C.
§ 371. O’Neal was also charged with four counts of violating,
and aiding and abetting the violation of, the Anti-Kickback
Statute, 42 U.S.C. § 1320a-7b(b)(2).
When a prosecutor in this case notified the Defendants
of the Texas investigation in March 2021, he relayed the
message from the O’Neal prosecution team in Texas that
O’Neal first became a subject of investigation in 2013 and was
not identified as a target until 2017. The Texas prosecutors
also reportedly said that “the investigation of O’Neal remained
covert” through at least the conclusion of the Defendants’ trial
in July 2014. (3d Cir. D.I. 345-3 at 3.) O’Neal was ultimately
indicted in December 2020 and pled guilty the following
August.
The prosecution team here asserts that it “did not learn
O’Neal was even being investigated,” or that “his prosecution
concerned conduct dating back to 2008,” until late January
2021. (3d Cir. D.I. 356.) And it did not obtain a copy of the
118
In this context, a “kickback” is a payment made to
encourage a healthcare provider to refer a patient to the
defendant or to compensate the healthcare provider for doing
so. 42 U.S.C. § 1320a-7b(b). Those payments are illegal when
the patient’s medical care is covered in whole or in part by a
federal healthcare program such as Medicare or Medicaid. Id.
163
indictment until early February. 119 It also claims to have
confirmed that, before early 2021, none of the “surviving
members of the prosecution team” – who include prosecutors,
FBI investigators, and a special agent for the Department of
Labor – knew that “O’Neal was under investigation for any
crimes with which he has now been charged.” (3d Cir. D.I.
345-3 at 2-3.)
Pelullo doesn’t buy that explanation. He notes that the
crimes alleged in O’Neal’s indictment “temporally
overlap[ped]” with O’Neal’s involvement in FirstPlus and his
cooperation with the prosecutors in this case (3d Cir. D.I. 345-
2 at 12-15), and he asks us to allow him to develop an
evidentiary record in the District Court as to what the
prosecutors knew about O’Neal at the time of trial. That record,
he says, will enable him to move for a new trial based on the
government’s violation of its duty to turn over all “evidence
[that] is material either to guilt or to punishment[,]” Brady, 373
U.S. at 87, including evidence “affecting [the] credibility” of
its trial witnesses, Giglio, 405 U.S. at 153-55. The
government’s failure to turn over such evidence, if the
information were in its actual or constructive possession, could
violate his due process rights and require a new trial. Id.;
119
The government initially represented that “Pelullo’s
prosecution team knew nothing about the investigation of
O’Neal or the conduct prompting his indictment until shortly
before the February 2021 unsealing of that indictment.” (3d
Cir. D.I. 346 at 2.) It then clarified that the indictment had been
unsealed in early January 2021 – which is confirmed by the
docket – but nonetheless insisted that it did not know about the
investigation until late January.
164
Dennis v. Sec’y, Pa. Dep’t of Corr., 834 F.3d 263, 291-92 (3d
Cir. 2016) (en banc).
The government responds that any knowledge the Texas
prosecutors had about the O’Neal investigation should not be
imputed to those in New Jersey and that, accordingly, the
information was not in its possession – in any meaningful sense
– at the time of trial. In this case, we need not wrestle with the
question of imputation of knowledge, because Pelullo’s motion
for a new trial would fail anyway for two distinct reasons: it
would be time-barred and it would not rest on a material
nondisclosure.
First, remanding the case would prove fruitless because
any motion would be time-barred. Rule 33(b)(1) provides that
a motion for a new trial based on newly discovered evidence
must be brought within three years of the verdict. See United
States v. O’Malley, 833 F.3d 810, 813 (7th Cir. 2016) (applying
Rule 33(b)(1) to Brady and Giglio claim); United States v.
Battles, 745 F.3d 436, 447 (10th Cir. 2014) (same for Brady
claim). That deadline is an “inflexible” one “meant to bring a
definite end to judicial proceedings[.]” United States v. Higgs,
504 F.3d 456, 464 (3d Cir. 2007). Pelullo contends that it is
unfair to apply that rule here, where it was the government who
kept the investigation hidden until more than three years after
he was convicted, but that characterization, even if it were
accurate, does not allow us to disregard Rule 33’s mandatory
language. And, as the government points out, refusing to
ignore the time limits of Rule 33 does not leave a defendant
utterly bereft of the ability to pursue a Giglio claim. Once his
convictions become final, he may be able to timely seek
appropriate relief in the District Court pursuant to 28 U.S.C.
§ 2255. See O’Malley, 833 F.3d at 813 (concluding that “a
165
postjudgment motion based on newly discovered evidence
which happens to invoke a constitutional theory” – such as
Giglio – “can be brought under Rule 33(b)(1) or § 2255”).
Second, Pelullo offers us no reason to believe that the
nondisclosure of the investigation into O’Neal was material.
The government’s failure to disclose potential impeachment
evidence violates due process, and thus requires a new trial,
“only if there is a reasonable probability that, had the evidence
been disclosed to the defense, the result of the proceeding
would have been different.” United States v. Bagley, 473 U.S.
667, 682 (1985). Put somewhat differently, a Brady or Giglio
claim requires a showing that the undisclosed evidence “could
reasonably be taken to put the whole case in such a different
light as to undermine confidence in the verdict.” Kyles v.
Whitley, 514 U.S. 419, 435 (1995). The O’Neal evidence does
not change the lighting here in any material way. Had the
Defendants known in advance that O’Neal was a subject (but
not yet a target) of an investigation – and had they used that
evidence to undermine O’Neal’s credibility on the stand or to
persuade the government not to call O’Neal as a witness – that
would not have saved them from conviction.
Pelullo and the government disagree as to O’Neal’s
significance to the prosecution’s case-in-chief: Pelullo calls
him ”the Government’s main witness” (3d Cir. D.I. 345-2 at
45), while the government says that his testimony was of a
“limited nature” (3d Cir. D.I. 345-3 at 3). It appears to us that
O’Neal’s testimony about the looting of FirstPlus was one
piece of corroboration within a mass of damning evidence.
There were nineteen other government witnesses and extensive
documentary evidence. See, e.g., supra Sections II.G, III.A-B,
IV.B, V.C-E. In the face of that overwhelming proof of guilt,
166
the Defendants could not have evaded conviction by pointing
out that O’Neal ran a shady chiropractic practice, nor by
persuading the government to sideline him at trial. Cf. Giglio,
405 U.S. at 151, 154-55 (finding due process violation where
government did not reveal impeachment evidence about “the
only witness linking petitioner with the crime[,]” on whose
testimony “the Government’s case depended almost entirely”).
Notwithstanding that other evidence, Pelullo insists that
O’Neal’s testimony was essential to establishing the fraudulent
acquisitions of Scarfo’s and Pelullo’s shell companies and to
connecting Pelullo to LCN. He first argues that “the
Government’s theory that the acquisitions were fraudulent
depended directly upon O’Neal’s testimony, and specifically
the notion that the acquisitions were made without [O’Neal’s]
knowledge or consent.” (3d Cir. D.I. 345-2 at 18.) But
Pelullo’s counsel already attacked O’Neal’s credibility on that
claim at trial. He impeached O’Neal with a transcript of a
board meeting in which O’Neal discussed the acquisition of
Rutgers and authorized William Maxwell to sign off on the sale
on his behalf. We seriously doubt that impeaching O’Neal
with evidence of his unrelated wrongdoing would have
changed his credibility in the eyes of the jury.
As for Pelullo’s claim that O’Neal’s testimony was
necessary to prove Pelullo’s mob ties, his own briefing
undercuts that assertion. O’Neal testified that he was told by
William Maxwell that Pelullo “was a consultant for Mr. Scarfo
and his group[,]” which O’Neal took to mean that Pelullo was
connected to “[o]rganized crime.” (JAC at 2595-96.) Pelullo
himself portrays that statement as “cryptic and devoid of actual
content[,]” and he likewise describes O’Neal’s testimony about
his perception of Scarfo as “the Godfather” as unpersuasive
167
and speculative. (3d Cir. D.I. 345-2 at 18-22.) And, as Pelullo
points out, O’Neal admitted on cross-examination that his only
knowledge of organized crime came from watching movies
and news coverage about Italian-American mobsters. More
importantly, the proof of Pelullo’s mob ties hardly depended
on O’Neal’s passing impressions. Pelullo’s own statements
and long history with the Scarfos proved that point.120
In short, the evidence of O’Neal’s participation in the
kickback scheme does not “put the whole case in such a
different light as to undermine confidence in the verdict.”121
120
As already noted, see supra Section IV.B.1, the
evidence of Pelullo’s mob ties outside of what O’Neal had to
say was extensive. The government presented expert
testimony about Scarfo’s and Scarfo’s father’s records of
involvement with LCN. It then connected Pelullo to LCN
through evidence of, inter alia, his effectively familial
relationship with the Scarfos, his efforts to ensure Scarfo
profited from FirstPlus without doing any work, and his fear of
the consequences of failing to provide financially for Scarfo’s
father.
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Pelullo also uses his motion to address several other
issues, including alleged deficiencies in the government’s
pretrial compliance with its disclosure obligations unrelated to
the O’Neal investigation and post-trial discoveries of purported
inconsistencies in O’Neal’s testimony. He cites little in
support of those allegations – some of which appear to
duplicate arguments raised in his primary briefing – and offers
no reason why those issues could not have been fully argued in
his opening brief, so we decline to address them. See United
168
Kyles, 514 U.S. at 435. Remanding Pelullo’s case – and
delaying the resolution of his and the other Defendants’
appeals – would therefore inevitably fail to secure him a new
trial, and so a remand is not in order.
VIII. CONCLUSION
The Defendants have raised a wide-ranging and
extensive list of objections to their convictions and sentences,
but none, save one, entitle any of them to relief. We will
accordingly affirm the convictions and sentences of Scarfo,
Pelullo, and William Maxwell. We will also affirm John
Maxwell’s conviction, but we will vacate his sentence and
remand to the District Court for further proceedings consistent
with this opinion. We conclude with a particular
commendation to the District Court for its deft and wholly
admirable management of this very complicated matter.
States v. Rawlins, 606 F.3d 73, 82 n.11 (3d Cir. 2010) (refusing
to address argument that appellant “fail[ed] to develop”);
United States v. Pelullo, 399 F.3d 197, 222 (3d Cir. 2005)
(requiring that issues be raised in an opening brief to avoid
forfeiture).
169