United States v. Neal Saferstein

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 10-4092
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UNITED STATES OF AMERICA
v.
NEAL D. SAFERSTEIN,
Appellant
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
(D.C. Crim. No. 2:07-cr-00557-001)
____________
Submitted Under Third Circuit LAR 34.1(a)
January 24, 2012
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Before: FISHER, GREENAWAY, JR., Circuit Judges, and JONES *, District Judge.
(Opinion Filed: January 26, 2012)
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OPINION
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GREENAWAY, JR., Circuit Judge.
Neal Saferstein (“Saferstein”) pled guilty in the United States District Court for
the Eastern District of Pennsylvania to four federal criminal charges related to a
*
Hon. John E. Jones, United States District Court for the Middle District of
Pennsylvania, sitting by designation.
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fraudulent business scheme in which he had engaged. In the plea agreement, Saferstein
waived his appellate rights subject to several exceptions, including an exception for “the
assertion of constitutional claims that the relevant case law holds cannot be waived.”
(App. 90.) Following his sentence, Saferstein now argues on appeal that the District
Court (1) violated his due process rights by denying him credit he believes he was due
under the United States Sentencing Guidelines (the “Guidelines”) for acceptance of
responsibility; (2) denied him his right of allocution at sentencing; and (3) violated his
rights under the ex post facto clause. He contends that his appellate waiver does not
foreclose any of these arguments.
We hold, as a result of a statement by the District Court during the plea colloquy,
which improvidently expanded Saferstein’s appellate rights, that Saferstein did not waive
his right to raise constitutional claims on appeal. We further find that his ex post facto
claim is of constitutional moment and meritorious. We will vacate and remand to the
District Court for resentencing.
I. BACKGROUND
Because we write primarily for the benefit of the parties, we recount only the
essential facts.
From 1997 until 2004, Saferstein was President, Chief Executive Officer, and
majority owner of GoInternet, a telemarketing company based in Philadelphia.
Beginning in 1997, GoInternet’s telemarketers cold-called businesses around the country
in an attempt to sell them an internet services package, including a web page, dial-up web
access, and an email account. GoInternet began charging each business that agreed to
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receive a “welcome packet” $29.95 per month for these services, a fee which was added
to its telephone bill. By the end of 2003, more than 350,000 businesses were “customers”
of GoInternet, yielding annual gross revenue in excess of $49 million.
GoInternet’s implementation of this business model had several fraudulent
aspects. First, the telemarketers frequently failed to disclose the full terms of the
agreement, including the fact that agreeing to receive a welcome packet would result in
the $29.95 monthly charge unless the business called GoInternet within fifteen days to
cancel services. Second, the welcome packet looked like unsolicited junk mail, so that it
was often discarded unopened. Even if a customer did open and read the welcome
packet, disclosures related to billing were hidden, so that most customers remained
unaware that they were required to cancel services in order to avoid being charged.
Third, because the charges appeared only within telephone bills, many customers did not
notice the GoInternet charges. Fourth, GoInternet lacked the personnel to handle
incoming calls from customers, making it extremely difficult for customers who
attempted to cancel to do so successfully.
In addition to these fraudulent practices, the web pages provided to GoInternet
customers were not accurate or useful to potential customers. The websites were generic,
filled with mistakes, and often appeared at web addresses that were impossible to locate
using major search engines.
The Government has estimated the losses to customers associated with the scheme
to be approximately $74 million.
3
In 2000, the Federal Trade Commission (“FTC”) brought suit against Saferstein
and GoInternet. Federal Trade Commission v. Mercury Marketing of Delaware, Inc.,
and Neal D. Saferstein, No. 00-CV-3281 (E.D. Pa. filed June 29, 2000). On March 1,
2001, the parties agreed to a stipulated judgment and order for permanent injunction,
which contained various prohibitions to protect customers from unauthorized billing and
directed GoInternet to send postcards to all of its customers informing them that they
were being billed and were paying for GoInternet services. Despite the agreement,
Saferstein directed that those postcards be altered or destroyed.
As a result of this and other noncompliant conduct, the FTC sought to hold
Saferstein and GoInternet in contempt. In anticipation of a hearing on that matter before
the District Court, Saferstein directed GoInternet executive, and eventual co-defendant,
Billy D. Light to testify falsely that 55,000 GoInternet customers used their email
accounts and 33,000 used their dial-up internet service each week. Throughout his time
as CEO of GoInternet, Saferstein earned approximately $20,000 each month in
commissions, in addition to an annual base salary. He also paid for significant personal
expenses with corporate funds. His tax returns, however, reported only his annual base
salary.
The criminal indictment in this case charged Saferstein with failing to report more
than $1.8 million in income. Saferstein additionally failed to pay more than $2.8 million
in payroll taxes that had been withheld from GoInternet employees’ paychecks.
The indictment charged Saferstein with (1) sixteen counts of mail and wire fraud;
(2) one count of conspiracy to commit perjury; (3) four counts of submitting false tax
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returns; and (4) six counts of failure to pay over payroll taxes. Just before trial, Saferstein
pled guilty to Count 1, mail fraud; Count 16, wire fraud; and Counts 20 and 21,
submitting false tax returns.
The plea agreement contained language stipulating that, “as of the date of this
agreement, the defendant has demonstrated acceptance of responsibility for his offense”
and is therefore “eligible for a 2-level downward adjustment” pursuant to the Guidelines.
(App. 86.) It also contained an appellate waiver provision, which provided that
Saferstein “voluntarily and expressly waive[d] all rights to appeal or collaterally attack”
his conviction, subject to several exceptions. (Id. at 90.) The waiver was “not intended
to bar the assertion of constitutional claims that the relevant case law holds cannot be
waived.” (Id.) Further, it provided an exception if the government were to appeal
Saferstein’s sentence and excepted a small number of enumerated claims that Saferstein
would be permitted to raise on appeal: (1) that his sentence exceeded the statutory
maximum for that count; (2) that the sentencing judge erroneously departed upward
under the Guidelines; or (3) that the sentencing judge imposed an unreasonable sentence
above the Guideline range.
During the plea colloquy, the District Court discussed the waiver in detail with
Saferstein. It explained the appellate rights that Saferstein would have absent the waiver
and precisely what rights remained. Regarding the provision concerning constitutional
claims, the court stated that the waiver “of course, is not intended to bar you [from]
raising constitutional claims, and only the Court can decide whether they are
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constitutional claims or some other kind of claim.” (Id. at 161.) When asked whether he
understood, Saferstein responded in the affirmative.
After the sentencing hearing, the District Court ultimately agreed with the Pre-
Sentence Investigation Report (“PSR”) that Saferstein qualified for a criminal history
category of I and an offense level of 43, largely as a result of the enormous amount of
money that the fraud involved. Based on this Guidelines calculation, Saferstein was
eligible for the statutory maximum sentence, forty-six years on the four counts.
The District Court denied Saferstein credit for acceptance of responsibility. It
based this determination on several factors. First, the Court noted that after pleading
guilty, Saferstein had failed to expeditiously turn over certain financial and medical
reports to the probation office. Second, it determined that a number of his statements
during the sentencing hearing “backtrack[ed] on the enormity of his own involvement in
the scheme that he is responsible for contriving.” (Id. at 298.)
The court, after granting a significant downward variance, sentenced Saferstein to
twenty-three years of imprisonment, composed of concurrent twenty-year sentences on
each of the wire and mail fraud counts, followed by concurrent three-year sentences on
the two counts charging submitting false tax returns. Saferstein also received three years
of supervised release and a fine of $100,000. Saferstein timely appealed.
II. JURISDICTION AND STANDARD OF REVIEW
The District Court had jurisdiction over this case pursuant to 18 U.S.C. § 3231.
This Court has jurisdiction over a challenge to the sentence under 18 U.S.C. §§ 1291 and
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3742(a). “[O]ur review of the validity and scope of appellate waivers is plenary.” United
States v. Corso, 549 F.3d 921, 926 (3d Cir. 2008) (citations omitted).
We review for plain error Saferstein’s claim that he was sentenced in violation of
the ex post facto clause, which he did not raise in the District Court. Fed. R. Crim. P.
52(b); United States v. Syme, 276 F.3d 131, 158 (3d Cir. 2002). “A defendant must
satisfy a four-prong test to be successful under plain error review: there must be (1) an
error; (2) that is plain; (3) which affects substantial rights; and (4) seriously impairs the
fairness, integrity, or public reputation of judicial proceedings.” United States v. Cesare,
581 F.3d 206, 209 (3d Cir. 2009) (citations omitted).
III. ANALYSIS
A. Appellate Waiver
When “the government invokes an appellate-waiver provision contained in a
defendant’s plea agreement, we must determine as a threshold matter whether the
appellate waiver prevents us from exercising our jurisdiction to review the merits of the
defendant’s appeal.” Corso, 549 F.3d at 926 (citations omitted). We decline to exercise
jurisdiction over the appeal where the issues on appeal fall within the scope of the waiver
and the defendant knowingly and voluntarily agreed to the waiver, unless “enforcing the
waiver would work a miscarriage of justice.” Id. at 927 (citations omitted).
Here, Saferstein argues that he did not waive his right to this appeal because each
of the issues he presents represent constitutional claims and the District Court, during the
plea colloquy, stated that the appellate waiver “of course, is not intended to bar you
[from] raising constitutional claims, and only the Court can decide whether they are
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constitutional claims or some other kind of claim.” (App. 161.) As a result, Saferstein
argues that the agreement he entered into voluntarily and knowingly preserves his right to
appeal constitutional claims.
The Government contends that this statement is not controlling, since it
misrepresents the plain language of the plea agreement, which states that the waiver was
“not intended to bar the assertion of constitutional claims that the relevant case law holds
cannot be waived.” (Id. at 90.) The District Court’s statement is clearly at odds with the
otherwise plain and straightforward language of the agreement. That statement thus
created a plausible and tangible ambiguity and seemingly expanded Saferstein’s appellate
rights. 1
We have not spoken before on the impact of a sentencing court’s oral statement
during a plea colloquy on the interpretation of a plea agreement. It is clear that principles
of contract law apply to plea agreements. United States v. Williams, 510 F.3d 416, 422
(3d Cir. 2007). Generally speaking, because the government exercises tremendous
bargaining power during the process of plea negotiation, we construe any ambiguities in
the text against the government as drafter, id. at 422, but the plain text at issue here is not
1
“[L]ogic indicates that if we may rely on the sentencing court’s statements to eliminate
ambiguity prior to accepting a waiver of appellate rights, we must also be prepared to
recognize the power of such statements to achieve the opposite effect. If it is reasonable
to rely upon the court’s words for clarification, then we cannot expect a defendant to
distinguish and disregard those statements of the court that deviate from the language of a
particular provision in a lengthy plea agreement.” United States v. Wilken, 498 F.3d
1160, 1168 (10th Cir. 2007).
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ambiguous. It clearly refers to a specific subset of constitutional claims, 2 not to the entire
category of constitutional claims, as the District Court’s statement during the colloquy
indicated.
The parol evidence rule generally mandates that when a “written contract is clear
and unequivocal, its meaning must be determined by its contents alone.” Amer. Eagle
Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 594 (3d Cir. 2009). However, the plea
colloquy has no analogue in contract law; indeed, regardless of the clarity of a written
plea agreement, Rule 11(b) of the Federal Rules of Criminal Procedure obligates a district
court, before accepting a plea of guilty, to place the defendant under oath and to address
the defendant orally and in open court, informing him of, inter alia, “the terms of any
plea-agreement provision waiving the right to appeal or to collaterally attack the
sentence.” Fed. R. Crim. P. 11(b)(1)(N). The court must also determine that the
defendant understands those terms. Id.We have recognized that a plea colloquy that fails to meet the requirements of
Rule 11(b)(1)(N) can prevent a defendant from knowingly and voluntarily waiving his
appellate rights. Corso, 549 F.3d at 928-930; see also United States v. Goodson, 544
F.3d 529, 540-41 (3d Cir. 2008). Given that precedent, and our recognition that plea
agreements must be construed to protect the defendant as the weaker bargaining party,
see Williams, 510 F.3d at 422, we must find that a statement made by the sentencing
2
Although the parties engage in substantial debate as to whether the category of non-
waiveable constitutional claims is an empty category, this is not a question we need to
resolve here. The language of the agreement is not ambiguous regardless of the answer.
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court during the colloquy can create ambiguity where none exists in the plain text of the
plea agreement. See United States v. Wilken, 498 F.3d 1160, 1168 (10th Cir. 2007)
(“[W]e cannot expect a defendant to distinguish and disregard those statements of the
court that deviate from the language of a particular provision in a lengthy plea agreement-
especially where, as here, neither the government nor defense counsel apparently noticed
the error at the time.”). We construe this ambiguity against the government and interpret
the waiver narrowly. Therefore, we shall allow Saferstein to raise constitutional claims
on appeal, as the District Court represented during the colloquy that he would be able to
do. 3
3
Saferstein’s argument that the District Court erred by denying him credit for acceptance
of responsibility is not constitutional in nature. The only support Saferstein musters for
his contention that this error implicates his due process rights, United States v. Furst, 918
F.2d 400, 408 (3d Cir. 1990), and its progeny, in fact notes constitutional dimensions to
sentencing based on materially false information. Saferstein’s allegation, that the
sentencing court erroneously interpreted the Guidelines is distinct and does not implicate
his due process rights.
Saferstein also argues that the District Court infringed upon his right of allocution by
allowing the Government to cross-examine him before sentencing. “[T]he right of
allocution is not constitutional.” United States v. Adams, 252 F.3d 276, 288 (3d Cir.
2001). Although Saferstein asserts that our later opinion in United States v. Fisher, 502
F.3d 293 (3d Cir. 2007), undermines the clear pronouncement in Adams, Adams still
controls. Our precedent makes clear that “to the extent that [an opinion of a panel of this
Circuit] is read to be inconsistent with earlier case law, the earlier case law . . . controls.”
Holland v. N.J. Dep’t of Corr., 246 F.3d 267, 278 n.8 (3d Cir. 2001) (citing O. Hommel
Co. v. Ferro Corp., 659 F.2d 340, 354 (3d Cir. 1981)).
Accordingly, neither of these claims falls under the constitutional exception to
Saferstein’s appellate waiver, and we shall not consider them on the merits.
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B. Ex Post Facto Claim
The only issue Saferstein raises which is of constitutional moment is his ex post
facto claim. Saferstein argues that his sentencing, which occurred in accordance with the
2009 Guidelines Manual, violated the ex post facto clause. See art. I, § 9, cl. 3. The mail
and wire fraud counts of which he was convicted occurred in December 2002 and June
2003, and the base offense level for fraud under the Guidelines was subsequently
increased on November 1, 2003. U.S.S.G. appx. C, amend. 653. Both counts for
submitting false tax returns of which Saferstein was convicted occurred after that date.
The Guidelines direct a one-book rule, requiring that a “Guidelines Manual in
effect on a particular date shall be applied in its entirety.” U.S.S.G. § 1B1.11(b)(2).
When a “defendant is convicted of two offenses, the first committed before, and the
second after, a revised edition of the Guidelines Manual became effective, the revised
edition of the Guidelines Manual is to be applied to both offenses.” § 1B1.11(b)(3).
According to the background note in the Guidelines, “Because the defendant completed
the second offense after the amendment to the guidelines took effect, the ex post facto
clause does not prevent determining the sentence for that count based on the amended
guidelines.” Id. The background note also provides that this approach “should be
followed regardless of whether the offenses of conviction are the type in which the
conduct is grouped under § 3D1.2(d),” unless the ex post facto clause would be violated
by that treatment. Id.
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Nonetheless, commentary to the Guidelines does not bind federal courts where it
violates the Constitution, United States v. Bertoli, 40 F.3d 1384, 1405 (3d Cir. 1994), and
we have held that the ex post facto clause requires that a sentencing court apply the
Guidelines Manual in effect at the time the offense was committed if retroactive
application of the later Manual would result in harsher penalties. United States v.
Seligsohn, 981 F.2d 1418, 1424 (3d Cir. 1992), superseded by statute for other reasons
as stated in United States v. Corrado, 53 F.3d 620, 624 (3d Cir. 1995). Further, we have
expressly disapproved the one-book rule where it conflicts with the ex post facto clause
by resulting in “more stringent penalties than were authorized at the time of the offense.”
Id.Even “[t]he fact that various counts of an indictment are grouped cannot override
ex post facto concerns,” Bertoli, 40 F.3d at 1404 (citing Seligsohn, 981 F.2d at 1424),
although our ex post facto concerns are assuaged when counts are properly grouped
under § 3D1.2(d) as “continuing, related conduct” and the sentencing court applies the
Guidelines Manual relevant to the latest count. United States v. Siddons, 660 F.3d 699,
707 (3d Cir. 2011). In such a case, “the grouping provisions, combined with the one-
book rule, place a defendant on notice that a court will sentence him or her under the
Guidelines Manual in effect during the commission of his or her last offense in a series of
continuous, related offenses.” Id.Here, the sentencing court applied the Guidelines Manual in effect when the false
tax returns were submitted to the IRS even though those counts were not grouped with
the mail and wire fraud counts. Indeed, the PSR recognized that, pursuant to our decision
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in United States v. Astorri, 923 F.2d 1052 (3d Cir. 1991), tax fraud counts could not be
grouped with fraud on private individuals. In this circumstance, the application of the
later edition of the Guidelines Manual did violate the ex post facto clause.
Since the sentencing court made an error that is plain, Saferstein meets the first
two prongs of the plain error test. See Cesare, 581 F.3d at 209. We have also held that
when the application of the wrong Guidelines Manual, in violation of the ex post facto
clause, results in the use of a higher sentencing range, there is a presumption that the
defendant’s substantial rights are affected. See Syme, 276 F.3d at 158. The government
has failed to rebut this presumption of prejudice. Finally, we have concluded in the past
that such an error “too ‘seriously affects the fairness, integrity, or public reputation of
judicial proceedings’ to be left uncorrected.” Id. (quoting Olano, 507 U.S. 725 (1993)).
Accordingly, we vacate Saferstein’s sentence and remand to the District Court
with instructions to calculate his base offense level in accordance with the Guidelines
Manual in effect when the mail and wire fraud counts were committed.
IV. CONCLUSION
For the reasons set forth above, we will vacate the sentence imposed by the
District Court and remand for resentencing in accordance with the above opinion.
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