United States v. Steven Paul

NONPRECEDENTIAL DISPOSITION

To be cited only in accordance with Fed. R. App. P. 32.1

United States Court of Appeals

For the Seventh Circuit

Chicago, Illinois 60604

Argued November 15, 2018

Decided November 29, 2018

Before

WILLIAM J. BAUER, Circuit Judge

MICHAEL S. KANNE, Circuit Judge

AMY J. ST. EVE, Circuit Judge

No. 17-3606

UNITED STATES OF AMERICA, Appeal from the United States District

Plaintiff-Appellee, Court for the Northern District of

Illinois, Eastern Division.

v.

No. 1:11-cr-00580-2

STEVEN PAUL,

Defendant-Appellant. Ronald A. Guzman,

Judge.

ORDER

After Steven Paul pleaded guilty to healthcare fraud, he sought to withdraw his

plea on two grounds. First, he argued that the government had offered him immunity

in exchange for his cooperation. Second, he contended that, because of the supposed

agreement not to prosecute, his lawyers were ineffective for allowing the prosecution to

proceed. The district court denied his motion. It ruled that the government had never

promised immunity and Paul’s lawyers had rendered adequate counsel. Because the

record supports these findings, the denial of the motion to withdraw was a permissible

No. 17-3606 Page 2

exercise of discretion. We thus reject Paul’s challenge to the district court’s ruling and

affirm the judgment.

Background

Paul jointly owned and operated chiropractic clinics in the suburbs of Chicago.

The government investigated Paul and others for using these clinics to bill Blue

Cross/Blue Shield fraudulently for services that were either medically unnecessary or

never actually provided. The insurance company was defrauded into paying Paul’s

clinics approximately $1.3 million.

After federal agents contacted Paul in February 2009 about the investigation, his

defense team sought over the next six years to obtain immunity or other relief from

prosecution in exchange for Paul’s cooperation with the government. These extended

attempts are reflected in correspondence, affidavits, and testimony presented to the

district court, which are recounted below.

Paul testified that the government never gave him a written immunity deal or

told him personally, “you [are] getting immunity.” But during their years of

negotiations, Paul’s attorneys repeatedly assured him that he could receive immunity

for his cooperation. With cooperation in mind, in April 2009 Paul signed an agreement

with federal prosecutors. It provided that in exchange for Paul’s truthful proffer of

information, the proffer would not be used against him in a later prosecution. The

agreement, however, allowed the government to prosecute Paul if his proffer led to the

discovery of new evidence against him: “The government is completely free to pursue

any and all investigative leads derived in any way from the proffer, which could result

in the acquisition of evidence admissible against your client.” The letter concluded:

“This letter embodies the entirety of the agreement to make a proffer. No other promise

or agreement exists between you or this office regarding the proffer.”

Paul’s cooperation continued, and six months later, in October 2009, he and his

defense team met with the government to prepare Paul’s statement to a grand jury. The

meeting became contentious: Paul still wanted immunity in return for his testimony,

but the Assistant United States Attorney (AUSA) offered only to defer prosecution. The

AUSA’s “draft” proposal to defer prosecution lacked signatures, a specified amount of

restitution, and details of what Paul would admit. According to one of Paul’s lawyers,

after the defense team fumed at the perceived discrepancy between their discussions

No. 17-3606 Page 3

and the AUSA’s offer, the AUSA “apologized” and “realized that offer was not what

had been promised.”

After the meeting, Paul and the defense team reviewed their options. They

discussed the import of a deferred-prosecution agreement. One lawyer described it as

“prosecutor’s probation”; if Paul met its terms, he would not be prosecuted. The lawyer

advised him to reject the deferred-prosecution proposal and hold out for immunity.

Paul did so and continued to assist the government’s investigation. According to Paul’s

lawyer, the AUSA was encouraging: the AUSA said that a discussion about “immunity

was back on track.” The defense team thought that one obstacle to concluding an

immunity deal was Paul’s refusal to pay restitution, so in May 2010 Paul gave $150,000

to Blue Cross/Blue Shield and received a release.

But an immunity deal never materialized. In frustration, a year later, in June

2011, one of Paul’s lawyers wrote to the AUSA to review the chronology of the

fluctuating conversations about immunity. According to the lawyer, in 2009 the

government stated that it “cannot guarantee immunity.” Then, in January 2010, the

lawyer thought that “the government might immunize Dr. Paul.” Later, in June 2010

(after Paul’s $150,000 payment), the government reported “second thoughts about Dr.

Paul’s restitution.” Finally, in April 2011, the defense team “was caught off guard”

when the government asked, “Why is Dr. Paul deserving of immunity?” Paul’s lawyer

implored the government to consider Paul’s cooperation “as it weighs the prosecutorial

decision.” The government, however, never changed its position on refusing to grant

immunity.

Paul’s strategy changed in the fall of 2011. One of his lawyers had asked the

government to revive the deferred-prosecution offer, but the prosecutor declined. With

his options diminished, Paul signed a plea letter. The letter provided that Paul would

plead guilty to one count of healthcare fraud and the government would recommend

that the court sentence Paul below the applicable guidelines range.

A year later, in 2012, Paul entered a formal plea agreement and pleaded guilty to

one count of healthcare fraud. At the change-of-plea hearing, he swore that he was fully

satisfied with his attorneys’ advice and representation, had read the written plea

agreement, understood its terms, and entered into it voluntarily. The signed plea

agreement “represent[ed] the entire understanding that [he] had with the government

about [his] guilty plea,” and no one had made any other promises to him inducing him

to plead guilty.

No. 17-3606 Page 4

Over the next two years, Paul’s lawyers tried still to avoid prosecution. They

renewed their request for deferred prosecution, but the government again declined to

offer it and stood by the plea agreement. With new counsel in May 2015, Paul tried a

new strategy. He asked for a “Kastigar-Palumbo” hearing and to withdraw his plea. In

Kastigar v. United States, 406 U.S. 441 (1972), the Court ruled that when the government

prosecutes someone after granting that person use or derivative-use immunity, the Fifth

Amendment requires a hearing to determine if the government’s evidence came from

an independent source. In United States v. Palumbo, 897 F.2d 245 (7th Cir. 1990), we ruled

that informal grants of immunity also necessitate a Kastigar hearing. Paul raised two

arguments in his motion. First, he contended that because (in his view) the government

had promised him transactional immunity for his cooperation, he should be allowed to

withdraw his guilty plea. Second, Paul maintained that he had received ineffective

assistance of counsel, so his plea was involuntary. He complained that his former

attorneys should have used the immunity deal to challenge his indictment and that they

did not inform him about or explain the deferred-prosecution offer.

The district court granted Paul partial relief. It denied his request for a Kastigar-

Paulmbo hearing because no evidence suggested that the government had offered him

immunity; the parties were merely negotiating. Paul also failed to explain, the court

reasoned, why he signed the plea agreement if he believed he had a promise of

immunity. The court then turned to the ineffective-assistance claim. Because Paul had

never received immunity, his counsel was not ineffective for failing to challenge the

indictment on that basis. (Paul does not challenge this ruling on appeal.) But the district

court granted Paul a limited hearing on his claim that, because his counsel did not

advise him about the deferred-prosecution offer, he should be allowed to withdraw his

plea.

After the hearing, the court ruled that Paul’s counsel was not ineffective and that

the guilty plea would remain. The court observed that the “draft” proposal from

October 2009 about deferred prosecution did not specify a restitution amount or Paul’s

offenses, so it did not require advice to Paul. But in any case, Paul’s lawyer had told Paul

about it, and he and counsel strategically chose not to pursue it because they wanted to

go for immunity and were unsure if Paul could pay the restitution that would

accompany deferred prosecution. The court later sentenced Paul to 20 months in prison.

No. 17-3606 Page 5

Analysis

On appeal, Paul first argues the district court erred by denying his motion for a

Kastigar-Palumbo hearing. He contends that the government’s statements to his defense

attorneys that immunity was “back on track” reasonably induced him to give up his

Fifth Amendment right against self-incrimination and to cooperate with the

government. The hearing, Paul concludes, would show that the government promised

not to use his testimony, so any evidence that it derived from his testimony and used

against him to induce his guilty plea is barred.

To receive a Kastigar-Palumbo hearing, Paul must raise a “significant, disputed

factual issue regarding whether or not the government made a formal or informal grant

of immunity to [him].” See United States v. Quintanilla, 2 F.3d 1469, 1483 (7th Cir. 1993).

He has not, for three reasons. First, no dispute about immunity arises if, as here in the

proffer letter, the government merely promised that “nothing the [defendant] said

could be attributed to him or used against him, but that the government would be free

to follow any leads provided by [defendant] against him.” See United States v. Lyons, 670

F.2d 77, 80 (7th Cir. 1982). In Lyons, although the district court held a Kastigar hearing,

after reviewing a proffer agreement exactly like Paul’s, we ruled that in light of that

agreement the defendant had not been granted immunity. Id.; see also United States v.

Sophie, 900 F.2d 1064, 1071 (7th Cir. 1990) (ruling that statements from the government

akin to “I cannot promise anything” but “I’ll see what we can do” are insufficient to

trigger an evidentiary hearing).

Second, as the district court permissibly found, Paul has conceded that he

received no promises of immunity. In his written plea agreement, in his initial proffer

letter, and during the colloquy at his change-of-plea hearing, Paul stated that the plea

agreement encompassed all promises that the government had made to him. He

admitted under oath that no document or statement from the prosecution reflects an

immunity deal. Although Paul might try to contradict this previous, sworn testimony in

order to create a factual dispute that would require a hearing to resolve, he must

explain why his earlier testimony was wrong, and he has not attempted to do so. Cf.

Cleveland v. Policy Mgmt. Sys. Corp., 526 U.S. 795, 806–07 (1999) (noting the federal

circuits have unanimously held a party cannot create a fact dispute by contradicting his

previous sworn statement without an adequate explanation); United States v. Purnell,

701 F.3d 1186, 1190–91 (7th Cir. 2012).

No. 17-3606 Page 6

Third, Paul’s lawyer admitted in his June 2011 chronology to the AUSA that no

immunity agreement ever materialized. That concession, too, obviates the need for a

hearing. See Quintanilla, 2 F.3d at 1482–83. It is true that Paul’s lawyers expected to

receive an immunity agreement, and the AUSA at one point said that immunity was

“back on track.” But these statements reflect only negotiations about immunity, as the

chronology from Paul’s lawyer itself confirms, not a concluded deal. See United States v.

Eliason, 3 F.3d 1149, 1153 (7th Cir. 1993) (affirming denial of Kasitgar hearing where

defendant volunteered information hoping for favorable treatment).

Paul responds with cases in which a Kastigar hearing was granted, but they are

distinguishable because each involved either a government concession of immunity, see

Palumbo, 897 F.2d at 248, or a defendant’s sufficiently detailed assertion of an immunity

agreement. See United States v. Cahill, 920 F.2d 421, 425 (7th Cir. 1990) (defendant’s

assertion that government orally granted defendant transactional immunity led to

evidentiary hearing). Neither has occurred here. Indeed, in his statements to the district

court about immunity, Paul never described the supposed agreement. None of his

statements provide “what the terms of the promise were; when, where, and by whom

the promise had been made; and the identity of [the] witness[es] to its communication.”

Blackledge v. Allison, 431 U.S. 63, 76 (1977) (habeas-corpus proceeding).

The foregoing discussion also defeats Paul’s contention that we should in this

case recognize and apply to him the doctrine of “equitable immunity.” Under the

doctrine, some kind of promise by the government not to prosecute is generally

required. See, e.g., United States v. Fuzer, 18 F.3d 517, 521 (7th Cir. 1994); United States v.

Weaver, 905 F.2d 1466, 1474 (11th Cir. 1990). But in Patel v. United States, we reserved

judgment on whether to recognize the doctrine of “equitable immunity” because the

defendant had signed a letter agreement providing that “the government was free to

pursue investigative leads contained in [his] proffer.” 19 F.3d 1231, 1236 (7th Cir. 1994).

Paul too signed a proffer letter stating that the government could pursue any

investigative leads from the proffer. Paul did not present evidence that the parties ever

modified this agreement, so his contention that “his proffer agreement(s) morphed into

immunity representations by the government” fares no better. See Weaver, 905 F.2d at

1471–73.

Paul also challenges the district court’s refusal to allow him to withdraw his

guilty plea based on ineffective assistance of counsel. We review that decision for abuse

of discretion. See United States v. Graf, 827 F.3d 581, 582–83 (7th Cir. 2016). Paul argues

No. 17-3606 Page 7

that his counsel was deficient in advising him to reject the deferred-prosecution

proposal that the AUSA presented in October 2009.

The government responds that Paul’s argument is forfeited. According to the

government, Paul previously argued that his lawyers were ineffective because they

never explained the deferred-prosecution agreement to him, whereas now he argues

that his lawyers were deficient for advising him to reject it. Although the two arguments

are related, the district-court record shows that Paul argued only that his lawyers were

ineffective for failing to advise him about the agreement. And this is the argument that

the district court addressed in its order denying Paul’s motion. Because Paul now

presents a new theory of relief, it has been forfeited. See United States v. Middlebrook, 553

F.3d 572, 577 (7th Cir. 2009); see also Econ. Folding Box Corp. v. Anchor Frozen Foods Corp.,

515 F.3d 718, 720 (7th Cir. 2008).

Regardless, his argument is meritless. To show the district court that a plea was

involuntary because of ineffective assistance, a defendant must demonstrate both that

counsel’s performance was objectively unreasonable and a reasonable probability that

he would have not pleaded guilty or would have obtained more favorable terms had

counsel been effective. United States v. Jansen, 884 F.3d 649, 655–56 (7th Cir. 2018).

Strategic decisions that were sound at the time they were made do not support an

ineffective-assistance claim. See id. at 656.

The district court acted within its discretion in denying Paul’s motion to

withdraw his guilty plea because Paul cannot establish ineffective assistance of counsel.

His attorneys offered two strategically reasonable grounds for rejecting a deferred-

prosecution proposal in October 2009. They thought that Paul lacked the ability to pay

sufficient restitution and that he could pursue an immunity deal through enhanced

cooperation. Although Paul denied that his attorneys explained these considerations to

him, the district court’s finding to the contrary was not clearly erroneous. See id. at 656.

Multiple emails and testimony establish that Paul’s lawyers discussed these

considerations with him on several occasions. Relying on hindsight, Paul responds that

this advice was poor because the government later refused to re-offer deferred

prosecution or offer immunity. But an unwanted outcome to a reasonable strategy does

not render the strategy constitutionally deficient. See Missouri v. Frye, 566 U.S. 134, 145–

47 (2012); see also United States v. Springs, 988 F.2d 746, 749 (7th Cir. 1993) (“Prosecutors

need not offer discounts and may withdraw their offers on whim.”). In any case, Paul

cannot show prejudice. He does not challenge the district court’s ruling that the

deferred-prosecution proposal was too indefinite to be an offer. Thus, even if his

No. 17-3606 Page 8

lawyers had advised him to pursue negotiations about it, there is no reasonable

probability that those negotiations would have led to a mutually acceptable offer. The

district court’s denial of Paul’s motion to withdraw his guilty plea was therefore not an

abuse of discretion.

AFFIRMED