Appendix — Matthews v. United States

}

; SFP 11 19

in the i

Supreme Court”

of the

United States

OCTOBER TERM 1978

NO. 4287406

C. CAREY MATTHEWS,

Petitioner,

US.

UNITED STATES OF AMERICA,

Respondent.

PETITIONER’S APPENDIX TO THE

PETITION FOR A WRIT OF CER-

TIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE FIFTH

CIRCUIT

————_

LAW OFFICES OF

LEO GREENFIELD, P.A.

1680 N.E. 135th Street

North Miami, Florida 33181

Attorneys for Petitioner

TABLE OF CONTENTS

Page

Appendix “A”

ORDER OF DISMISSAL ................... 1-10

Appendix “B”

OPINION OF June 9, 1976 .................. 11-18

Appendix “‘C”’

ORDER DENYING MOTION TO VACATE

I Gai age cc anes hive ian cies caves 19-20

Appendix “D”

OPINION OF March 20, 1978 ............... 21-28

Appendix “‘E”’

AFFIDAVIT OF PHILIP J. MANDINA ..... 29-34

Appendix ‘“‘F”’

AFFIDAVIT OF IRWIN J. BLOCK ......... 35-36

Appendix “G”

WALL STREET JOURNAL ARTICLE OF

SN is ove v es Like rob Lda son cd wens 37-47

Appendix ““H”’

VARIOUS PAGES FROM TRANSCRIPT OF

TESTIMONY HEARING OF September 2,

here Ba Ae air pdy epherel Bra) Limos PSP shade re A aPC 48-58

App. i

APPENDIX ‘‘A’”’

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

CASE NO. 75-1134 CIV-CA

FILED

AUGUST 5, 1975

JOSEPH I. BOGART, CLERK

U.S. DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

MIAMI, FLORIDA

UNITED STATES OF AMERICA,

Plaintiff,

vs.

C. CAREY MATTHEWS,

Defendant.

ORDER OF DISMISSAL

Petitioner, C. Carey Matthews has filed this Motion

to Vacate and set aside sentence and adjudication and

guilty plea pursuant to 28 U.S.C. 2255.

The Petitioner entered his guilty plea to Count 14 of

a multi count indictment on January 7, 1972 before the

Honorable Peter T. Fay being case No. 71-606 CR-PF.

The plea was entered after a plea bargain in compliance

with the standards set forth by the ABA. The agreement

was basically that if the petitioner entered a plea to

App. 1

Count 14 the remaining counts would be dismissed by

the government. The government further agreed to

recommend that petitioner be given a probationary

period of five (5) years and not any incarceration, and

the government further agreed to recommend that no

fine be imposed upon the Petitioner.

The plea was entered per the provisions of the

United States Supreme Court decision of Alford v.

North Carolina, 400 U.S. 25 (1970).

The two grounds set forth in this petition are:

1. That the plea of guilty was coerced.

2. That the sentence, adjudication and guilty

plea were in violation of Rule 11, in that a

proper factual foundation had not been laid,

as required by law.

As to ground one the Petitioner alleges his plea of

guilty ‘was an involuntary act because of a threat con-

veyed to Matthews and in the belief that the Trial Judge

Peter T. Fay, had conveyed through the prosecuting at-

torney, to movant’s counsels and to movant, informa-

tion that if the movant was going to trial, the other

defendants having taken pleas in exchange for favorable

sentences, that the said Judge ‘would sentence movant,

if convicted, to at least ten (10) years in prison.

This matter came up for hearing before the

Honorable Judge Fay on June 13, 1975 and after hearing

the subject matter of this present motion recused him-

self from consideration of this motion to vacate and the

petition was sent to the Clerk for reassignment.

App. 2

This petition was filed June 10, 1975 and the

Petitioner states that he did not present this issue to the

Court until this date as the first doubt he had that

Judge Fay had not made the alleged threatening state-

ment as conveyed to petitioners by the United States

Attorney was when the Petitioner read a newspaper arti-

cle April 24, 1974 and that this doubt was further sub-

stantiated because of the interest in justice manifested

by Judge Fay during a January 10, 1975 hearing heid on

Petitioner’s motion to terminate his probation.

In weighing the merits of petitioner’s claims this

Court considered the fact the Petitioner was.an able at-

torney who was admitted to practice before both the

Florida Bar and the New York Bar. Upon a close ex-

amination of the transcript of the entering of the plea

this Court can only determine that it was freely and

voluntarily given and the Court received the plea in full

compliance with Rule 11 of FRCP and tenants of Alford

v. North Carolina. At page 3 of the sentencing transcript

it recites the following:

“THE COURT: Within the purview of that case, do

you make this decision, though, freely and voluntarily?

MR. MATTHEWS: Yes, I do, Your Honor. I think

that I have been treated with great courtesy by counsel.

MR. SONNETT: Thank you.”’

The above Mr. Sonnett being the same Assistant

United States Attorney that Petitioner sets forth in this

petition was the person who coerced the plea of guilty

through fraud, deceit. trickery and coercion.

App. 3

In two recent decisions of the Supreme Court of the

United States; Boykin v. Alabama, 395 U.S. 238, 89

S.Ct. 1709, 23 L.Ed.2d 274 (1969); and McCarthy uv.

United States, 394 U.S. 315, 89 S.Ct. 1166, 22 L.Ed.2d

418 (1968) the essence of these decisions being that the

sentencing Judge must quiet his doubts regarding the

plea, and that a clear record of the proceedings be es-

tablished. The Supreme Court has not mandated

guidelines beyond those imposed by the Federal Rules of

Criminal Procedure 11.

There is no claim by the petitioner that a plea

bargain was not fulfilled to bring this case within the

decision of Santobello v. New York, 1971, 404 U.S. 257,

92 S.Ct. 495, 30 L.Ed.2d 427 or even in a later United

States Fifth Circuit Court of Appeals decision Bryan vu.

United States, 492 F.2d 775 (5th Cir. 1974) an en banc

decision which arose from a pro se motion presenting a

similar question as the one presented in this petition.

The Court of Appeals said:

“Bryan had his day in Court on the issue of

whether a bargain had been <onnected with his

plea. Both he and his counsel denied that a

bargain was involved ‘directly or indirectly’.

Section 2255 itself proscribes successive mo-

tions for similar relief and in the spirit of that

bar we hold that record’s positive ‘no bargain’

affirmation precludes the necessity to retry the

issue.”

In the Bryan case the court clearly stated that it is

one thing to consider a silent record and ancther to con-

sider an issue such as this where the record clearly

App. 4

speaks for itself and the contention of a petitioner raises

questions of the involuntariness of a plea. Again in the

present case coercion was emphatically denied by

petitioner and his attorneys standing with him, the trial

court couldn’t have given the petitioner more of an op-

portunity to speak. It is also clear from the record of the

taking of the plea and subsequent appearances by the

petitioner before the trial judge that the judge was most

symphatic to the petitioner and gave him no cause to

fear the bringing of any matter before the court.

The question such as raised by this petition was

further settled by the courts when in Frank v. United

States, 501 F.2d 173 (5th Cir. 1974), the court said:

.... ‘Frank, like Bryan, testified without con-

flict or equivocation that no plea bargain had

been made or promised, directly or indirectly

.... We find this factor controlling in this ap-

peal, and leave to other cases the determina-

tion of prisoner motions in the face of records

silent on plea bargaining or indicative of

specific motives to disclaim plea bargaining.”

From an examination of the record by this court, it

is clear that all of the facts brought out in this petition

were known to the petitioner at the time of making the

plea and that his plea at the time and under the specific

facts of this case this course can only conclude that the

plea when made was freely and voluntarily made by the

petitioner. In Alford, Supra it was held that even if the

plea was entered out of a fear of the possibility of a death

sentence it would not afford a basis for relief. Parker v.

North Carolina, 397 U.S. 790 (1970); Brady v. United

States, 397 U.S. 742 (1970).

App. 5

We now consider Petitioner’s second contention,

that there was not sufficient factual basis established for

the plea. The determination of whether there is a factual

basis for a plea of guilty need not rest solely upon

evidence presented by the government; certainly the

court is permitted to consider the Petitioner’s testimony

in making this determination.

The transcript of the taking of the plea and es-

tablishing factual basis recites the following beginning

with page 8:

A. David A. Ross; I am a trial attorney with

the Securities and Exchange Commission,

Washington, D.C.

Q. Mr. Ross, in connection with your official

duties, have you had occasion to conduct an

investigation concerning Mr. Matthew’s

relationship to the State Fire and Casualty

Company?

A. Yes.

Q. With regard to Count 14, which charges a

securities law violation that occurred on or

about January 10, 1968, would you please

state the results of your investigation.

A. During the course of our investigation, after

reviewing of documents and interviewing of

witnesses, we determined that Mr.

Matthews caused the mails to be used to

distribute a proxy statement to State Fire

stockholders on or about January 10, 1968,

App. 6

which statement did not include certain

material information regarding activities of

Capital Bancshares and people connected

with State Fire. This was in connection

with a proposal to postpone a recapitaliza-

tion plan for State Fire.

. What was Mr. Matthew’s position with

State Fire and Casualty Company at the

time that proxy went out?

. Mr. Matthews, our investigation showed,

was the general counsel to State Fire, a

director, a nominee for director, and I think

that was it at the time, or possibly a vice

president of State Fire.

. Are the factual allegations, as contained in

Count 14, those that have been established

by your personal investigation, interviews

with witnesses, examination of corporate

records and other records?

. Yes.

Mr. Sonnett: We have nothing further at

this time, your Honor.

THE COURT: Any cross-examination of

this witness?

MR. BLOCK: No, your Honor.

THE COURT: Thank you, sir.

App. 7

(Thereupon the witness was excused).

THE COURT: Anything else from either

party?

MR. SONNETT: Just to clear up the

record, I previously announced that at the

time of sentencing the Government would

dismiss the remaining counts of the indict-

ment.

THE COURT: Yes. That was part of the

agreement, as I understand it, and as I

wrote it down.

MR. BLOCK: We have nothing further,

Your Honor.

The trial court made inquiry factually precise

enough to be within the ambit of the charges made

against him and without any objections, deletions or ad-

ditions requested by Petitioner or his attorneys. United

States v. Bethony, 489 F.2d 91 (5th Cir. 1974). All par-

ties involved in this matter agreed that to try the case

could take weeks if not months and would defeat the

motivation for plea bargaining and pleas of guilty. The

requirements of the court is that the inquiry be factually

precise enough and sufficiently specific to develop the

defendant’s conduct on the occasion involved was

within the ambit of that defined as a criminal. Jimenez

uv. United States, 487 F.2d 212, (5th Cir. 1973).

The Petitioner had a hearing before the trial judge

on his Petition for Termination of Probation on January

10, 1975 and during that hearing reiterated sufficient oc-

App. 8

currences on his part to have established factual basis

for his plea and this was still three years after his plea

was entered and accepted by the court. At page 20 of his

January 1975 hearing petitioner said:

‘Nevertheless, I understand that there were

certainly various mistakes that I would not

repeat in connection with the case. I would bea

lot more suspicious and distrusting of persons

for whom I was working and I have learned a

good deal from the probationary period and

everything that has ensued subsequent to it.

I certainly would never take a job as a director

or officer of a company that I knew very little

about and as to which I knew practically

nothing of the owners, particularly a public

company. It’s a grave mistake, because you

become in a sense, in the sense of the Securities

and Exchange Act — you become responsible

as a director and an officer for everything they

do.

I recognize that far more fully and clearly than

I did then.”

The record clearly refutes petitioner’s claims that

his guilty plea was not entered freely and voluntarily

with a full understanding of the nature and conse-

quences thereof. The record clearly establishes that the

petitioner understood the nature of the charge, that he

entered his plea freely and voluntarily with a full un-

derstanding of the plea and there was a factual basis for

the plea.

App. 9

Under these circumstances it is unnecessary to re-

quire an evidentiary hearing to resolve petitioner’s

claims. Traber v. United States, 466 F.2d 483 (5th Cir.,

1972); Hunter v. United States, 449 F.2d 156 (5th Cir.

1971).

For these reasons, it. is

ORDERED AND ADJUDGED that the Motion to

Vacate Sentence be and the same is hereby DENIED,

and that this cause stands DISMISSED.

DONE AND ORDERED at Miami, Florida, this

2nd day of August, 1975.

/s/ Signature Illegible. :

UNITED STATES DISTRICT JUDGE

cc: Bernard Hunter, Est.

1680 N.E. 125th Street,

North Miami, Florida 33181

Lloyd G. Bates, Jr.

Assistant U.S. Attorney

300 Ainsley Building

Miami, Florida

App. 10

APPENDIX ‘‘B’’

C. Carey MATTHEWS,

Plaintiff-Appellant,

¥.

UNITED STATES of America,

Respondent-Appellee.

No. 75-3497.

United States Court of Appeals,

Fifth Circuit.

June 9, 1976.

Motion was filed to vacate and set aside guilty plea

on ground that it was coerced by reason of alleged threat

from the trial court that defendant would receive at

least a ten-year sentence if he did not plead guilty,

which threat allegedly was conveyed by the prosecutor

to movant’s counsel and through that counsel to mo-

vant. The United States District Court for the Southern

District of Florida, C. Clyde Atkins, J., denied motion

without an evidentiary hearing, and movant appealed.

The Court of Appeals, Dyer, Circuit Judge, held that

although at time of sentencing movant stated that plea

was not induced by any threats or coercion and although

his-counsel indicated that he had nothing to add to the

proceedings, movant was entitled to an evidentiary

hearing in view of counsel’s sworn affidavit substan-

tiating allegations that threatening statements had been

made to him by the prosecutor, sworn affidavit of defen-

dant’s law partner stating that he was privy to such con-

App. 11

versations and sworn affidavit of prosecutor that he did

not make any such statements to counsel.

Reversed and remanded.

1. Criminal Law — 997.16(5)

Although at rule 11 colloquy defendant stated that

guilty plea was not induced by threats or coercion,

defendant was entitled to evidentiary hearing on motion

to vacate and set aside plea on ground that it was co-

erced by reason of alleged threat from trial court that

defendant would receive at least a ten-year sentence if

he did not plead guilty where petition was supported by

counsel’s sworn affidavit substantiating allegation that

such threatening statements had been made as well as

sworn statement of defendant’s law partner that the lat-

ter was privy to such conversations and sworn affidavit

from the prosecutor denying any such statements.

Fed.Rules CrimProc. rule 11, 18 U.S.C.A; 28 U.S.C.A.

§2255.

2. Criminal Law — 997.16(5)

Allegations of a petitioner accompanied by his own

affidavit are insufficient to mandate an evidentiary

hearing on a petition to vacate and set aside guilty plea

as being involuntary in face of a record, as made at time

of guilty plea, detailing statements by petitioner that

his plea was not induced by any threats or coercion.

Fed.Rules Crim.Proc. rule 11, 18 U.S.C.A.; 28 U.S.C.A.

§2255.

3. Criminal Law — 997.11

App. 12

It is not improper to refer to magistrate for his

recommendation petition seeking to vacate and set

aside guilty pleas. 28 U.S.C.A. §2255.

Appeal from the United States District Court for

the Southern District of Florida.

Before DYER, SIMPSON and RONEY, Circuit

Judges.

DYER, Circuit Judge:

[1] The sole question before this Court is whether

the district court erred when it denied Matthews’ mo-

tion under 28 U.S.C.A. §2255 to vacate and set aside his

guilty plea without an evidentiary hearing. We conclude

that under the particular facts or this case, an eviden-

tiary hearing was required. We therefore reverse and

remand.

Matthews was charged with multiple violations of

the Securities Act of 1933, and the Securities and Ex-

change Act of 1934. After initially pleading not guilty to

all counts, Matthews withdrew that plea and, pursuant

to Alford v. North Carolina, 1970, 400 U.S. 25, 91 S.Ct.

160, 27 L.Ed.2d 162, he entered a plea of guilty to one

count, notwithstanding his continuing assertions that he

was innocent of the charges brought against him. The

remaining counts were dismissed.

The Section 2255 petition alleged that Matthews

was coerced into entering the guilty plea by reason of a

threat conveyed by the Assistant United States Attor-

ney heading the prosecution team to Matthews’ coun-

App. 13

sel,! and through that counsel to Matthews. The sub-

stance of the allegation related to a private conference

between the Assistant United States Attorney and the

district judge. Since all other codefendants had entered

guilty pleas, and since the trial promised to be long, the

district judge is alleged to have stated in this conference

that Matthews would receive at least a ten year sentence

if he did not enter a guilty plea and was subsequently

found guilty by a jury. The petition states that this in-

formation was relayed to Matthews’ counsel by the

Assistant United States Attorney, and by Matthews’

counsel to Matthews. Important to the outcome of this

case, the petition was supported by a sworn affidavit

signed by Matthews’ counsel, substantiating the allega-

tion that these statements were made to him by the

Assistant United States Attorney. A sworn affidavit was

also filed by Matthews’ law partner, stating that he was

privy to the conversation in which Matthews’ counsel

related these threats to Matthews. Subsequent to the

filing of the petition, the government filed a sworn af-

fidavit signed by the Assistant United States Attorney,

stating that he had never had such a private conference

with the district judge, and that he had never conveyed

these statements to Matthews’ counsel.

Faced with these conflicting sworn affidavits, the

district court? nevertheless denied Matthews’ Section

2255 petition without an evidentiary hearing on the

basis of this Court’s en banc decision in Bryan v. United

States, 5 Cir. 1974, 192 F.2d 775. The district court

~ |Matthews is represented on the Section 2255 motion by dif-

ferent counsel.

The district judge who received the guilty plea recused himself

from consideration of the Section 2255 petition, and the petition

was assigned to another judge.

App. 14

noted that at the time of sentencing, a full Rule 11 collo-

quy took place, and Matthews there stated that his plea

was not induced by any threats or coercion. His counsel,

the same attorney alleged to have received the threat,

was also present at the Rule 11 hearing, and, although

not addressed directly by the court, indicated that he

had nothing to add to the proceedings. In the view of the

district court, Bryan precluded Matthews from

challenging statements made by him in the plea

proceeding so as to gain Section 2255 relief. Since he was

bound by those statements, no evidentiary hearing was

required, and the court could only conclude that his plea

was freely and voluntarily entered.

In Bryan, this Court en banc drew a balance be-

tween the Section 2255 requirement that an evidentiary

hearing is necessary unless the motions, files, and

records of the case ‘‘conclusively show” that the prisoner

is entitled to no relief, and the need for finality in the

criminal process. As stated in Bryan, if a prisoner could

challenge prior statements made at a Rule 11 hearing

without limit, then

the number of hearings which a wilful affiant

could provoke as to a single conviction would

be limitless, for each time he could swear that

someone at the last preceeding hearing sub-

orned false testimony from him or his lawyer or

that the judge played false in the performance

of his duties.

492 F.2d at 780. In reaching this balance, the court did

not conclude that a Section 2255 petition could never

challenge statements made at a prior plea proceeding.

As this Court has stated:

App. 15

We do not view the foreclosure principle set

forth in Bryan to constitute an absolute and

ironclad rule that the ‘“‘magic words” of the

Bryan-Rule il examination completely

eliminate the necessity for a hearing on a §2255

motion in all circumstances.

Vandenades v. United States, 5 Cir. 1975, 523 F.2d 1220,

1224. Rather, the Court carefully compared the facts

before it to the precepts of the Supreme Court laid down

in Fontaine v. United States, 1973, 411 U.S. 213, 93

S.Ct. 1461, 36 L.Ed.2d 169, and Machibroda v. United

States, 1962, 368 U.S. 487, 82 S.Ct. 510, 7 L.Ed.2d 473,

both of which required an evidentiary hearing under the

“conclusively show” standard of Section 2255. The

Court pointed to several characteristics which

distinguishes Bryan from Fontaine and Machibroda.

First, Bryan did not involve aliegations of threats or

coercion which induced the plea, as in Fontaine and

Machibroda. Second, unlike those two cases, Bryan sup-

ported his petition with only his own affidavit to counter

directly inconsistent former testimony. Thus, Bryan is

inapposite to the case now before us, where the petition

alleges threats which coerced the plea, and where the

petition is supported not only by the affidavit of the

petitioner, but also by the affidavits of third persons.

See Vandenades, supra, 523 F.2d at 1224, fn. 6.

[2] Subsequent to Bryan we have held that its

principles are not limited to situations involving a

traditional plea bargain, but that those principles also

apply to a Section 2255 petition which alleges that the

guilty plea was induced by threats or coercion. In this

later situation, under the rationale of Bryan, the allega-

tions of the petitioner accompanied by his own affidavit

App. 16

are insufficent to mandate an evidentiary hearing in the

face of a Rule 11 record detailing statements by the

petitioner that his plea w. ; not induced by any threats

or coercion. United States v. Barrett, 5 Cir. 1975, 514

F.2d 1241; Jackson v. United States, 5 Cir. 1975, 512

F.2d 772.

Subsequent decisions have also held, however, that

Bryan does not apply to eliminate the requirement of an

evidentiary hearing when the petition is supported not

only by the allegations of the petitioner, but also by

credible third party affidavits or other documentary

evidence. Dugan v. United States, 5 Cir. 1975, 521 F.2d

231; Vandenades, supra.

In Dugan, petition alleged an unkept plea bargain

and was supported by affidavits of a county deputy and

sheriif, stating that both state and federal officials had

made promises to Dugan that he would receive a sen-

tence of only four years. At the plea proceeding, the

court questioned Dugan as to whether any promises had

been made in connection with the guilty plea, and

Dugan replied in the negative. This Court concluded

that the existence of the supporting affidavits, rather

than the negative response elicited at the plea

proceeding, was controlling, and an evidentiary hearing

was necessary to resolve Dugan’s claim. The rationale of

Bryan was found to be inapplicable when third party af-

fidavits accompanied the petition:

While allowing a petitioner to obtain an

evidentiary hearing by merely alleging an un-

kept plea bargain would enable a wilful affiant

to provoke as to one conviction endless hear-

ings for each time he could swear that someone

App. 17

at the last hearing suborned false testimony,

such rationale for denying a hearing does not

control here. See Bryan v. United States, 492

F.2d at 780. When the petitioner presents af-

fidavits from third parties, the danger of

repeated hearings no longer exists. . . . When

petitioner goes beyond mere allegations by

presenting credible affidavits that raise a sub-

stantial inference that an unkept bargain was

in fact made, §2255 requires an evidentiary

hearing.

521 F.2d at 233. See also Vandenades v. United States,

supra, at 1223 (“‘when the record discloses other credible

documentary evidence which indicates a right to relief

an evidentiary hearing may be necessary’).

The case before us is controlled by Dugan. Here, we

have affidavits that raise a substantial inference that

threats or coercion in fact induced Matthews’ guilty

plea. Of course, we make no attempt to resolve the con-

flict in the affidavits before us, nor do we intimate any

view as to whether Matthews would be entitled to

withdraw his plea if the allegations of his petition are in

fact correct. But, as decided in Dugan those affidavits

tip the balance drawn by Bryan. Matthews is entitled to

an evidentiary hearing on his claim.

[3] Matthews also clai.s that there was an insuf-

ficent factual basis for the entry of this Alford plea.

Further, he challenges the local procedure whereby Sec-

tion 2255 petitions are referred to the magistrate for his

recommendation. We find these assertions of error

without merit.

REVERSED AND REMANDED.

App. 18

APPENDIX ‘‘C’’

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

CASE NO. 74-1134-Civ-CA

C. CAREY MATTHEWS,

Plaintiff,

vs.

UNITED STATES OF AMERICA,

Defendant.

ORDER DENYING MOTION

TO VACATE SENTENCE

[Filed Oct. 13, 1976]

THIS CAUSE came before the Court on plaintiff's

motion to vacate sentence. The motion is denied.

On September 2, 1976, this Court conducted an

evidentiary hearing directed to the issue of whether the

government induced plaintiff's guilty plea by means of

threat vel non. Because plaintiff alleged that the threat

was made by the government attorney to plaintiff's at-

torney over the telephone, the testimony of those per-

sons is the relevant testimony before the Court. The

subjective thoughts of plaintiff and his partner are not

material to the issue.

After careful analysis of the testimony adduced at

the hearing, and after consideration of the memoranda

App. 19

submitted by both parties, it is the finding of this Court

that although the attorney for the government may have

speculated to plaintiff's attorney that his client would

receive a lengthy sentence if convicted, there was no

threat conveyed. Accordingly, it is

ORDERED AND ADJUDGED that the motion to

vacate sentence is denied.

ENTERED at Miami, Florida this 13th day of Oc-

tober, 1976.

/s/ C. Clyde Atkins

- United States District Judge

ce.

U.S. Attorney

Leo Greenfield, Esq.

App. 20

APPENDIX ‘‘D”’

C. Carey MATTHEWS,

Petitioner-Appellant,

Vv.

UNITED STATES of America,

Respondent-Appellee.

No. 76-4244.

United States Court of Appeals,

Fifth Circuit.

March 20, 1978.

Motion was filed to vacate and set aside guilty plea

on ground that it was coerced by alleged threat that

defendant would receive a lengthy sentence if convicted.

On remand, 533 F.2d 900, the United States District

Court for the Southern District of Florida, C. Clyde

Atkins, J., found that no threat had been made, and mo-

vant appealed. The Court of Appeals, Roney, Circuit

Judge, held that: (1) finding was not clearly erroneous,

and (2) defendant’s subjective belief alone was not suf-

ficient to invalidate the plea.

Affirmed.

1. Criminal Law — 1158(1)

In a proceeding to vacate and set aside a guilty plea

the district court’s finding of fact are to be upheld unless

clearly erroneous. 28 U.S.C.A. §2255.

App. 21

2. Criminal Law — 1158(1)

Finding that although prosecutor may have

speculated to defense counsel that defendant would

receive a lengthy sentence if convicted there was no

threat conveyed inducing defendant to plead guilty was

not clearly erroneous. 28 U.S.C.A. §2255.

3. Criminal Law — 273(1)

A defendant’s subjective belief that he will receive a

lengthy sentence if he goes to trial is not alone sufficient

to invalidate a guilty plea. U.S.C.A. §2255; Fed.Rules

Civ.Proc. rule 11, 18 U.S.C.A.

4. Criminal Law — 1181 .

Although more detailed findings on motion to

vacate and set aside guilty plea might have been

helpful, remand therefore was not required absent show-

ing of prejudice. 28 U.S.C.A. §2255.

Appeal from the United States District Court for

the Southern District of Florida.

Before JONES, RONEY and TJOFLAT, Circuit

Judges.

RONEY, Circuit Judge:

This case initially came to this Court for determina-

tion of whether C. Carey Matthews was entitled to an

evidentiary hearing on his §2255 claim that threats or

coercion induced his guilty plea. Holding that an

evidentiary hearing was required, we remanded the case

App. 22

ON Ome eee,

to the district court. Matthews v. United States, 533

F.2d 900 (5th Cir. 1976). This present appeal questions

the district judge’s finding, on remand, that no threat

had been made. We affirm.

Matthews, a former member of the Florida

legislature and former practicing attorney, charged with

securities, mail and wire fraud, plead guilty to one count

of a nineteen count indictment, at the same time

asserting his innocence, a procedure specifically

authorized by the Supreme Court’s decision in Alford v.

North Carolina, 400 U.S. 25, 92 S.Ct. 160, 27 L.Ed.2d

162 (1970). In return, the Government agreed to dismiss

the other counts of the indictment and recommend five

years probation, which Matthews received.

Matthews later brought the instant motion to

vacate under 28 U.S.C.A. §2255, claiming his guilty plea

had been coerced. He alleged the prosecutor had told his

counsel that the trial judge said he would sentence

Matthews to at least ten years imprisonment if

Matthews went to trial and was found guilty. Matthews

alleged that it was only after this threat that he decided

to plead guilty.

We held that an evidentiary hearing was required to

determine the truth of Matthews’ assertions, because of

conflicting affidavits of Sonnett, the prosecutor; Block

and Mandina, Matthews’ attorneys; and Matthews. At

the evidentiary hearing, a district judge other than the

trial judge who took the plea received testimony from

these affiants.

The former prosecutor, Neal Sonnett, testified that

at Block’s request he had gone to see the trial judge to

App. 23

determine whether or not the judge would accept an

Alford plea. This short discussion with the judge was

limited to that question. When the judge indicated he

would accept the Alford plea, Sonnett reported that fact

to Block, who had waited outside the judge’s chambers.

Sonnett denied that he had conveyed to Block any

opinion about what the judge would do if the case went

to trial. Sonnett did testify, “‘out of a sense of fairness to

Mr. Block,’ that he could ‘‘understand the cir-

cumstances under which Mr. Block might have gotten

this impression [that Sonnett knew something about

what the judge intended].”’ But he immediately

followed this by again categorically denying that he had

ever indicated to Block the things that Matthews

alleged.

Irwin Block, Matthews’ former defense attorney,

was the second witness. He testified that what he had

said in his affidavit was true, ‘‘as far as it goes,” but that

it needed ‘“‘elaboration’”’ and Matthews’ present counsel

had “read something into it that is not contained there

[since] nowhere [in his affidavit] was there any indica-

tion of any threats.’’ Block said that during negotiations

prior to trial, he and Sonnett had discussed what would

happen if Matthews was convicted: Block thought

Matthews would get either probation or a short prison

sentence, and Sonnett thought that Matthews would get

a long prison sentence. When Sonnett talked to him af-

ter leaving the judge’s chambers, Block testified that

‘‘Somehow or other, I got the impression that there was

some indication, no threats, no statements, but some in-

dication from whatever was said, that the judge felt

about this case the way that Neal [Sonnett] had in-

dicated to me,” i. e., that if convicted Matthews might

get a long term of imprisonment. Block characterized

App. 24

the impressions he had gotten from Sonnett as mere.

“‘laywer talk.” He ‘“‘at no time took it as a threat and

[he] at no time conveyed it as a threat.”’ Block said he

had told Matthews that he was not even sure whether

the judge had said anything, but he felt obliged to con-

vey it to him.

Philip Mandina, Matthews’ former law partner,

was the next witness. He testified that he was with

Matthews when Block called, and that he had par-

ticipated in Block’s call. He summarized the call by

testifying that Block said specifically that he had a dis-

cussion with Sonnett and Sonnett had talked to the

judge, who had indicated to him that if Matthews was

found guilty on any one count he would give him at least

ten years in jail. Mandina testified that he thought the

call was “threatening in nature,”’ but, significantly, he

also said that Block had told Matthews that he did not

think the judge had made the statement. Mandina said

that he had not believed that the judge had made the

statement either. He and Matthews discussed the situa-

tion, and Matthews decided that he could not take the

chance, so he decided to plead guilty.

Matthews then testified in his own behalf. He said

that he had been prepared to go to trial until he had

received the call from Block. According to Matthews,

Block said the judge had “threatened”’ a ten-year sen-

tence, and this had not been an impression on Block’s

part but unequivocally what Sonnett had told him the

judge had said. Matthews testified that while Block had

told him Sonnett was politically ambitious and might be

lying, Matthews believed the threat, because he could

not afford to take a chance of not believing it and receiv-

ing ten years imprisonment. He also explained that he

App. 25

had not mentioned the threat when questioned by the

trial judge during the Rule 11 guilty plea hearing, at sen-

tencing or when he had previously petitioned to ter-

minate probation, because he believed the judge was

“hostile” and would refuse to accept the plea and

possibly give him an even harsher sentence if he spoke

up. Matthews said he had finally brought the §2255

petition because he had become convinced by a

newspaper article suggesting that Sonnett wanted a con-

viction in his case for political reasons, and by the

judge’s fair and compassionate attitude at the probation

termination hearing, that the judge had not made the

threat which Sonnett had conveyed to Block.

After hearing all of this testimony, the district

judge found “that although the attorney for the Govern-

ment may have speculated to plaintiff's attorney that

his client would receive a lengthy sentence if convicted,

there was no threat conveyed.” He denied relief.

[1] In a §2255 case, the district court’s findings of

fact are to be upheld unless they are clearly erroneous.

United States v. Strother, 458 F.2d 424 (5th Cir.), cert.

denied, 409 U.S. 1011, 93 S.Ct. 456, 34 L.Ed. 2d 305

(1972).

[2] Matthews places great reliance on the contents

of Block’s and Mandina’s affidavits instead of the

testimony at the evidentiary hearing. We remanded this

case for an evidentiary hearing precisely because the af-

fidavits were contradictory. At that hearing, Mandina

testified substantially in accordance with his affidavit,

but added that neither he nor Block viewed Sonnett’s

statement as a threat by the judge. Block stated that his

affidavit was correct as far as it went, but that it needed

App. 26

elaboration, and that he had viewed Sonnett’s remark

not as a threat but just as “lawyer talk.’ Sonnett con-

tinued to categorically deny that he had ever passed

along a threat. Based on a careful review of the

transcript of this testimony at the evidentiary hearing,

the district court’s finding is not clearly erroneous.

[3] Matthews contends that the district court erred

in refusing to consider his subjective belief that a treat

had been made. The law of this Circuit, however, holds

that the defendant’s subjective belief alone is not suf-

ficient to invalidate a guilty plea. See, e. g., United

States v. McIntosh, 566 F.2d 949 at 951 (5th Cir. 1978):

United States v. Maggio, 514 F.2d 80, 88 (5th Cir.), cert.

denied, 423 U.S. 1032, 96 S.Ct. 563, 46 L.Ed.2d 405

(1975); United States v. Battle, 467 F.2d 569 (5th Cir.

1972).

The First Circuit’s recent decision in McAleney v.

United States, 539 F.2d 282 (1st Cir. 1976), cited by ap-

pellant, is not to the contrary. In McAleney, the

prosecutor ventured his personal estimate that

McAleney might receive three to five years in prison. At

the evidentiary hearing, the trial court found that

McAleney’s counsel translated the prosecutor’s opinion

into a Government promise to recommend such a sen-

tence. The First Circuit held that McAleney was en-

titled to rely on his counsel’s erroneous representation of

such an agreement. But the court also noted that

without his counsel’s erroneous transmission of the

alleged Government promise, McAleney’s subjective

belief would be immaterial. 539 F.2d at 284.

If Block had transmitted a Government threat to

Matthews, then McAleney would be relevant. We need

App. 27

not decide here whether we would adopt the First Cir-

cuit’s position where a defendant's own attorney

transmits a non-existent Government promise to his

client, for we are not now faced with such a situation.

The clear implication from the district court’s finding is

that Sonnett did not convey a threat to Block, nor did

Block transmit such a threat to Matthews. Since no

threat was transmitted to Matthews by the Government

or by his own counsel, his subjective belief is not

material. McAleney, supra; Maggio, supra.

[4] Finally, Matthews contends we must again re-

mand the case because the district court did not suf-

ficiently set forth findings of fact and conclusions of law

as required by §2255. Although they might have been

helpful, Matthews has not been prejudiced by the ab-

sence of more detailed findings. See Papalia v. United

States, 333 F.2d 620 (2d Cir.), cert. denied, 379 U.S. 838,

85 S.Ct. 74, 13 L.Ed.2d 45 (1964).

AFFIRMED.

App. 28

i

APPENDIX “‘E”’

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF FLORIDA

CASE NO. 71-606-CR-PF

UNITED STATES OF AMERICA,

Plaintiff,

-V8s-

C. CAREY MATTHEWS,

Defendant.

AFFIDAVIT

STATE OF FLORIDA _ )

)SS

COUNTY OF DADE )

BEFORE ME, the undersigned authority, per-

sonally appeared PHILIP J. MANDINA, who, after be-

ing first duly cautioned and sworn, deposes and says:

I am an attorney, a member of the Florida Bar, with

offices located at 1710 South Bayshore Drive, Miami,

Florida.

That during the approximate period 1965 through

January 1972, I was a member of a law partnership with

C. Carey Matthews,

. On or about October 13, 1971, Mr. Matthews was

indicted, along with three other parties, in a case filed in

App. 29

the District Court of the United States for the Southern

District of Florida, Case No. 71-606, CR-PF, charging

him and the other parties with certain violations of the

Securities and Exchange Acts of 1933 and 1934.

The aforesaid charges arose out of Mr. Matthews

accepting a commitment in January 1968 to serve as

general counsel of the State Fire and Casualty Com-

pony, Miami, Florida. Said company was in financial

straits which eventually resulted in its liquidation by

the Florida Insurance Department.

During this period of time, our firm also served as

defense counsel, defending various liquidated suits in-

volving the assureds of State Fire.

At the request of the President of the company, we

also moved our law offices and subleased space in a

building leased to State Fire and Casualty Company,

however, our firm maintained separate offices in that

building.

As defense counsel to represent him in the aforesaid

trial, Mr. Matthews retained Irwin Block, Esquire, dis-

tinguished member of the Florida Bar with offices in

Miami, and subsequent president of the Dade County

Bar Association.

The indictment in question basically accused the

Defendants of conspiring to violate the Securities and

Exchange Acts aforementioned, and the Rules and

Regulations of the Securities Exchange Commission in

various ways designed to defraud the company and its

assets.

App. 30

Mr. Matthews served as general counsel and as an

officer and director for a period of seven months, resign-

ing on July 23, 1968. The company continued its

business until April of 1969 when it was placed in li-

quidation. During the approximate seven months of Mr.

Matthews connection with State Fire, he was absent for

the best part of January and June in two separate

special sessions of the Florida Legislature of which he

was a member. He did not have an office with State Fire

but his office was located with our law firm, and I know

of my own knowledge that he conspired with no one to

defraud State Fire, or to violate the laws and regulations

pertaining to the Securities and Exchange Commission.

The trial in the Southern District of Florida was

scheduled to come before Judge Peter Fay on or about

January 10, 1972. Several days before the trial date, Mr.

Matthews and I were in our law office discussing the

forthcoming trial and going over the exhibits in

readiness for said trial. All of the other defendants had

plead guilty to certain counts of the indictment after

plea bargaining and had received favorable treatment

from the United States Attorney in connection with the

pleas. It was clear to us that certain defendants, in par-

ticular Benjamin Dobson, the President of State Fire,

were not willing to discuss the case and their testimony

with our counsel, Mr. Block, or with us, although up un-

til a few days before trial, Dobson had stated that he was

prepared to testify to the truth that Mr. Matthews was

not involved in any way with any conspiracy in connec-

tion with State Fire.

Suddenly, Dobson refused to return our phone calls

and Mr. Block, Mr. Matthews’ attorney, called this to

App. 31

oe

the attention of the court by motion for continuance.

This motion was denied.

On the day in question, which I believe was January

7, 1972, as Mr. Matthews and I were discussing the case

in our law office, we received a call from Irwin Block,

Mr. Matthews’ counsel. Mr. Block requested that both

of us get on the phone on different extensions as he had

important information to convey.

Mr. Block stated to Mr. Matthews and to me that

he had just come from a discussion with Mr. Neal Son-

nett, the Chief of the Crimes Division, United States At-

torney’s Office in Miami, concerning Mr. Matthews’ en-

tering a plea of guilty to at least one count of the 19

count indictment. Several such discussions had been

held at prior times during the week by Mr. Block and

Mr. Sonnett, but Mr. Matthews had told me and we

agreed that he was going to go to trial on the case no

matter what the other defendants did or what pressures

were brought upon them to bring false testimony against

him.

Mr. Matthews with me on the telephone on these

prior occasions when Mr. Block had reported the discus-

sions with Mr. Sonnett to us, had indicated to Mr. Block

that he was ready to go to trial and wanted a trial

despite whatever pressures the government could bring

on the witnesses.

In this final telephone conversation, which I believe

was on January 7th, Mr. Block was considerably upset

and related to us that Mr. Sonnett had just advised him

that he had just left the office of Judge Peter Fay, the

trial judge, who had discussed with him the forthcoming

App. 32

trial date and the fact that Mr. Matthews was to be the

only defendant. Sonnett related that the Judge was up-

set about the possibilities of a trial lasting several

months and that the Judge had conveyed to him that

the message should be made known to Mr. Matthews

and his counsel that in the event of conviction of one of

the counts of the 19 count information, he would impose

upon Mr. Matthews a ten-year sentence to the Federal

Penitentiary. Block, myself and Mr. Matthews were

stunned at this statement.

Matthews said to me, ‘This is hard to believe, but I

can’t believe that the Chief of the Crimes Division

would risk deliberately lying about a threat like this

from the judge. I have to believe it’s true.”

After further discussion, Mr. Matthews said to me,

“This is a terrible threat to put on a man with three

children, a one-year old, three-year old and four-year

old. What would ever become of them? I can’t afford to

take a chance on a conviction and a ten-year sentence.

especially with a threat like this. For my family’s sake, |

really have no alternative.”

Mr. Matthews then agreed to meet with Irwin Block

to enter a plea of guilty to a single count of the indict-

ment pending against him, Count 14.

As to Count 14 of the indictment; it pertained to a

violation of certain regulations of the Securities and Ex-

change Commission and Act in causing to be mailed cer-

tain proxy statements containing misleading informa-

tion or omitting to state information which should have

been placed in the proxy statements.

App. 33

Actually, I know as a matter of fact that the proxy

statement in question was not prepared by Mr.

Matthews, it was prepared by Norman Leibling, a

Chicago, Illinois attorney and outgoing general counsel

of State Fire. Neither Mr. Matthews nor our office par-

ticipated in any way in the distribution or disseminating

of the proxy statement, which was done by State Fire

and Casualty Company itself.

I know of my own personal knowledge from the dis-

cussions with Mr. Block on January 7th, as hereinabove

related, and thereafter with Mr. Matthews, that Mr.

Matthews would never have entered a plea of guilty of

any count of the indictment, as he was innocent of all

counts thereof, and only did so on the alleged direct

threat relayed by Assistant United States Attorney Neal

Sonnett to Irwin Block, Mr. Matthews’ attorney, and

thus to Mr. Matthews, that a ten-year sentence awaited

him if convicted. For family reasons as above stated, he

sacrificed his political and legal future. An injustice has

been done here and should be righted.

FURTHER AFFIANT SAYETH NOT.

/s/ Philip J. Mandina

Philip J. Mandina

SWORN to and SUBSCRIBED before me

this 10 day of June, 1975.

/s/ Donna B. Wallace

NOTARY PUBLIC, State of Florid- at Large

My Commission expires: Feb. 10, 1976

App. 34

APPENDIX ‘“‘F”’

STATE OF FLORIDA

COUNTY OF DADE

Before me, the undersigned authority, personally

appeared IRWIN J. BLOCK, who, being by me first

duly sworn, did depose and say:

1. In 1971 and in January of 1972, he was

representing Carey Matthews in connection with a case

pending in the United States District Court before the

Honorable Peter T. Fay, United States District Judge,

involving Carey Matthews and other defendants.

2. On the eve of trial, the undersigned was con-

tacted by Neal Sonnett, Assistant United States Attor-

ney, and to the best of undersigned’s knowledge, advised

that the Court had indicated to him, Mr. Sonnett, that

if Carey Matthews went to triai and was found guilty, he

would be sentenced to a substantial term of years, the

exact number of which Affiant does not remember to-

day, but which he believes to be in excess of ten years.

3. Your Affiant immediately conveyed this infor-

mation to Carey Matthews who, thereafter decided to

plead guilty, rather than take the chance of being sen-

tenced to the time indicated by the Assistant United

States Attorney.

Further, Affiant saith not.

/s/ Irwin J. Block

IRWIN J. BLOCK

App. 35

Sworn to and subscribed before me

this 11th day of June, 1975.

(Signature Illegible)

Notary Public State of Florida at Large

My commission expires Mar. 9, 1977

App. 36

APPENDIX ‘‘G’’

WALL STREET JOURNAL

APRIL 24, 1974

Under the Gun

As Feds Closed In,

Promoter Closed Deal

With Top Nixon Aide

Mort Zimmerman Bought

LaRue Family Business,

Put LaRues on Payroll

Did Prosecutors Go Easy?

By JONATHAN KWITNY

Staff Reporter of

The Wall Street Journal

From 1969 to 1972, S. Mort Zimmerman of Dallas,

Texas, may have been the nation’s most investigated

businessman.

He or some of his corporate enterprises were in-

dicted, enjoined, delisted, suspended or fined by courts,

enforcement agencies and a stock exchange. But in

January 1972, he struck a bargain with the Justice

Department and pleaded guilty to a few of the criminal

charges against him.

To the consternation of agents from the Securities

and Exchange Commission, the Federal Bureau of In-

vestigation, the Comptroller of the Currency’s office, the

App. 37

Postal Service and various state agencies, Mr. Zimmer-

man never went to prison. Now, a few investigators are

beginning to think that somebody pulled strings on Mr.

Zimmerman’s behalf.

Their evidence — based on matching old SEC files

with developments in the Watergate scandal — is only

circumstantial. And one SEC man thinks that Mr. Zim-

merman may have got off merely because a federal

prosecutor was willing to deal with Mr. Zimmerman in

return for evidence that would convict another man and

better enhance the prosecutor’s political ambitions. Mr.

Zimmerman himself says he avoided jaii fair and

square, largely because his violations were only

technical.

Still, the evidence solidly links Mr. Zimmerman in

a multimillion-dollar deal with Fred C. LaRue and

members of his family.

On Mr. Zimmerman’s Payroll

Mr. LaRue, as a top aide to Nixon campaign chief

John Mitchell, his chief political mentor since 1968, per-

formed duties that included such delicate chores as

helping to destroy incriminating evidence and to deliver

‘hush money” to Watergate burglars, for which he

pleaded guilty to conspiracy to obstruct justice. Earlier,

as a high-level consultant to President Nixon, Mr.

LaRue was unsalaried. But he by no means went un-

compensated. While he worked for the President, and

while investigators from many agencies were closing in

on Mr. Zimmerman, Mr. LaRue, his brother and his

brother-in-law were drawing $100,000 a year from a

company controlled by Mr. Zimmerman. The LaRue

App. 38

SS Ae DOR

PERE EE NTT oe

group had a large stock interest in the company. And

Mr. Zimmerman, through stock purchases and a big

bank loan, funneled them additional chunks of cash.

The LaRue group got into this position through the

sale of its debt-ridden family concern. Larco Drilling

Corp. to Mr. Zimmerman’s Capital General Corp. (then

Capital Bancshares Inc.) in April 1968. The investiga-

tions of Mr. Zimmerman had been intensifying for

nearly a year by that time. Larco, a Gulf Coast oil and

gas firm, had been founded by Fred LaRue’s father, I. P.

LaRue, Sr., who was accidentally shot to death by Fred

LaRue in a hunting mishap. By 1969 Larco was owned

by Fred LaRue; his brother, I. P. ({ke) LaRue Jr., and

Fred LaRue’s brother-in-law, Harry Owen.

At the time they sold it to Capital General, Larco’s

assets were valued at $3,700,493 (including a $390,000

loan to Messrs. LaRue and Owen), its liabilities at

$3,753,335. Mr. LaRue says the deficit may have

resulted from valuing the assets (mainly drilling equip-

ment and some oil property) at cost rather than market

value, though he says that he isn’t sure now. In any case,

Mr. Zimmerman’s Capital General gave the LaRue

family 22,085 shares of Capital General, worth nearly $2

million based on their $9-a-share bid price in the over-

the-counter market, in return for Larco.

A $750,000 Loan: Easy Terms

But in a complex fashion characteristic of many of

his business deals, Mr. Zimmerman sweetened the pot

considerably for the LaRue family. He arranged with his

banker, Roger B. Mize, to let Mr. LaRue and his

relatives borrow $750,000 from a Texas bank of which

App. 39

Mr. Mize was chairman. A Capital General subsidiary

bought $350,000 in certificates of deposit from two other

banks with which Mr. Mize was associated to induce the

loan. Collateral of 82,500 shares of Capital General was

put up, presumably by the LaRue family, though

records and memories now are unclear on the subject.

Still, Capital General was committed to repay the loan

if the LaRue family didn’t.

Of the $750,000 the LaRue family members were

permitted to borrow they used $390,000 to repay the

money Messrs. LaRue and Owen had borrowed from

Larco. They lent Larco another $200,000. They kept the

remaining $160,000, Mr. LaRue says.

Finally, Capital General agreed to employ Mr.

LaRue and his relatives for a total of $100,000 a year, to

be divided as they chose, and to insure them stock op-

tions, which never were exercised because the price on

Capital General stock fell. Mr. LaRue became president

of Capital General’s new Larco subsidiary.

Troubles, but a Pay Raise

The deal looked good at first. Then it soured. By

March 1970, the price on Capital General stock had

fallen to $2 or $3.50 a share. The LaRues’ Capital

General shares, once worth about $2 million, then were

worth no more than $677,000, although their bank loan

had been reduced $200,000 by installments paid by

Capital General under the original agreement.

Despite his own troubles, Mr. Zimmerman stepped

in and had Capital General offer to buy back for

$750,000, or $12.50 a share, the 62,500 Capital General

App. 40

shares still held by the bank as collateral for the LaRues’

loan. This offer, had it been carried out, would have

more than repaid the LaRues’ remaining debt. While

the LaRues considered this offer, Capital General also

offered to upgrade the dwindling value of the LaRues’

loan collateral by adding stock in Capital General sub-

sidiaries. And Capital General offered to raise to

$160,000 a year from $100,000 the compensation to the

LaRues.

Throughout this 1969-70 period, Mr. Zimmerman

was in trouble. The same month he made the Larco

deal, State Fire & Casualty Co., a Miami-based insurer

that had been a subsidiary of Capital General until 10

months earlier, went bankrupt. It folded after a com-

plicated deal involving Mr. Zimmerman and Edward

Wuensche, who had been convicted of fencing stolen

stock and who had detailed his Mafia ties in con-

gressional testimony. The deal resulted in State Fire’s

valuable assets being replaced by worthless securities.

During the 18 months Mr. Zimmerman controlled State

Fire, he transferred $1.5 million of its liquid assets to

Capital General in exchange for stock in a Capital

General subsidiary. He took back this stock when he

sold State Fire and arranged for Wuensche to replace it

with securities that turned out to be worthless. Besides

setting the stage for State Fire’s bankruptcy, this

brought the investigators down on Mr. Zimmerman.

He faced other setbacks. The Comptroller’s office

was pressuring him to yield control of a chain of banks

that Capital General owned. Their questionable loans

allegedly had created big losses. Mr. Zimmerman had

contracted to sell his flagship bank, Capital National of

Miami. But the Comptroller’s office was unhappy

App. 41

because the chosen buyer was a Netherlands Antilles-

based mutual fund run by Allen Lefferdink, a controver-

sial offshore-fund promoter whose Colorado financial

empire had been brought down already by the SEC.

In April 1969, the same month he made the Larco

deal, Mr. Zimmerman’s Capital General sold control of

its Underwriters Trust Co., New York. Later, in

testimony at a congressional hearing, it was disclosed

that under Mr. Zimmerman’s control, Underwriters

Trust had accepted as loan collateral more than $1

miliion in stoien securities.

And also about the time of the Larco deal, the in-

surance departments of Florida and Arkansas, along

with the U.S. Postal Service, were contemplating action

against Mr. Zimmerman over the bankruptcy of North

American Guaranty Insurance Co., Little Rock. Some

16,000 policyholders had been stripped of their protec-

tion when North American’s assets evaporated during a

stock swap involving Capital General.

The American Stock Exchange and the SEC were

keeping a close eye on Mr. Zimmerman’s Intercontinen-

tal Industries conglomerate because of the involvement

of a prominent Mafia figure, Michael “Big Mike”

Polizzi. Later, in the summer of 1969, the Amex and the

SEC accused Intercontinental of issuing false publicity

releases. Mr. Zimmerman consented to a civil-court in-

junction against fraud. Trading in the stock was sus-

pended in June 1969. The Justice Department, which

handies criminal prosecutions for federal investigative

agencies, was beginning a probe into Mr. Zimmerman’s

affairs.

App. 42

Me ee oe CN

Oe as 6 DD emken e

ore

Oe Rel eS a oR BS

White House Pass

Throughout this period — the spring and summer

of 1969 — and, in fact, up until early egory of special

projects.”” A wealthy Mississippian and longtime

Republican leader, Mr. LaRue had contributed early to

Mr. Nixon’s 1968 campaign and become a top aide to

John Mitchell, who ran the campaign. After the 1968

election, Mr. LaRue went to work directly for the Presi-

dent, and Mr. Mitchell, of course. became Attorney

General.

Though Mr. LaRue wasn’t a full-time employe of

the President’s, he had a White House pass. and he was

supposed to be available at all times for assignment. Ac-

cording to a White House spokesman. the only com-

parable post under Mr. Nixon was that held by former

Treasury Secretary John Connally when he returned to

Washington last year to assist the President. But Mr.

Connally, unlike Mr. LaRue, was barred from outside

work while he served as special consultant.

(Early in 1972, Mr. LaRue left the White House to

work under Mr. Mitchell again in the Nixon campaign.

This work led him into the Watergate cover-up. He

pleaded guilty on June 27, 1973, to conspiracy to

obstruct justice. Sentencing has been delayed until he

completes his testimony against other defendants.)

Mr. Zimmerman’s connection with a top Nixon

strategist, whatever other value it may have had, did lit-

tle to stop the downhill side of his business ventures.

And Capital General’s stock plummeted. On Sept. 15,

1970, a year and a half after the Larco deal, it hit $1.75

bid. On that date the LaRues ended their employment

App. 43

agreement with $180,000 having been paid. But Larco,

still a Capital General subsidiary, bought back from

them 18,634 shares of Capital General stock at $6 a

share, for a total of $111,804, to cover debts the LaRues

had incurred, and Larco agreed to buy back from the

family another 105,000 shares at $6 in installments.

Also, the LaRue group was released from all liability for

the $750,000 bank loan. Capital General stock continued

to fall in the open market, hitting $1 bid on Nov. 19.

“Washington Pulled the String”’

Mr. Zimmerman’s legal troubles were coining to a

head, too. On April 30, 1971, he and four associates were

indicted by a federal grand jury in Miami on 19 counts

of mail and securities fraud involving Capital General’s

looting of State Fire. In December 1971 the grand jury

added a charge that Mr. Zimmerman attempted to

bribe an assistant U.S. attorney with $40,000 to win dis-

missal of the first indictment.

A month later, investigators were shocked to learn

that Mr. Zimmerman had negotiated a high-level

Justice Department deal. He was allowed to plead guilty

to four counts, for which he was fined $30,000, put on

probation and given immunity from all other charges.

The deal took place in January 1972, when Messrs.

Mitchell and LaRue were preparing to move from the

Justice Department and the White House, respectively,

to the Committee to Re-Elect the President. The

arrangement was made by Assistant U.S. Attorney Neil

Sonnett in Miami, but it was overseen by Robert

Hickey, supervisor of the criminal fraud section of the

Justice Department in Washington.

App. 44

TN, nb SO TPIS

Mr. Hickey flew to Miami for the negotiations. He

and Mr. Sonnett agreed to let Mr. Zimmerman plead

guilty to the handful of charges in return for a light sen-

tence and dismissal of the other charges.

‘Somebody in Washington pulled the string on us,”

says Kathryn Gregory, a lawyer who recently retired as

an official of the Florida Insurance Department. ‘I think

it had to be through LaRue. We spent years working on

that case,’ Irving Bober, another attorney for the

department, also cites the LaRue connection as a factor

in Mr. Zimmerman’s probation. “It was a Washington

deal,” he says. ‘““My best judgment is that everybody

knew what was going on down here (in Florida). he

says.

Was Society Cheated?

In Washington, the Justice Department declines to

comment, but some individuals involved dispute any

suggestion that Mr. LaRue influenced the settlement.

Mr. Sonnett, now a Miami attorney, says he had to per-

suade the Justice Department to agree to it. He says he

considered it simply on its merits.

David Ross, an SEC attorney, protested the settle-

ment. But he says he thinks the LaRue connection had

nothing to do with it. He says it came about because Mr.

Zimmerman had promised to testify against a co-

defendant, Carey Matthews, a prominent Florida

legislator, against whom evidence was weak. He says

that Mr. Sonnett, the assistant U.S. attorney in Miami,

was more interested in convicting a local politician —

Mr. Matthews — because Mr. Sonnett was about to quit

his job to run for state office and the Matthews’ convic-

App. 45

tion would be a feather in his cap. Mr. Sonnett did quit

to seek the Democratic nomination for state attorney in

Dade County — and lost; he says the handling of the

Zimmerman case had nothing to do with his political

aims. And Mr. Ross says higher officials in the Justice

Department, rather than wanting to let Mr. Zimmer-

man get off, had preferred a two-year jail sentence.

But the federal judge in the case, Peter Fay, was un-

easy about the settlement. “I was very upset about the

plea bargaining procedure because it made the court

into a rubber stamp,” he says. If the defendants were

guilty of all the charges, he said at the time, “our

judicial system and society have been cheated.” Judge

Fay says he went along with the agreement made by the

prosecutors because Mr. Zimmerman and his codefen-

dants had exposed themselves by offering evidence and

otherwise living up to their end of the deal. He says he

didn’t learn about the LaRue connection until long

afterward.

Mr. Zimmerman is coy about the LaRue connec-

tion. ‘‘He knew I had problems with the government, ”’

he says of Mr. LaRue. “He knew they were fishing

around my oftice for everything they could find. I always

told him I am a man who likes to meet with people,

anybody in government. I never had the opportunity. I

think he might have discussed it with people he knows,

but I never talked (to them).”’

The LaRues Get Out

Mr. LaRue doesn’t exactly remember it that way.

“I don’t recall him ever bringing the subject up,” Mr.

App. 46

ne a a ee

LaRue says, ‘“‘and I wouldn’t have (interceded)

anyway.”

(However, a former FBI agent, William F. Higgins

Jr., says he suspects that the Larco deal may have in-

fluenced orders he got to stop investigating a Cleveland

businessman with close ties to Mr. Zimmerman. The

agent was fired from the FBI after he kept probing for

fraud in several large bankruptcies involving the

businessman. The Justice Department says Mr. Higgins

SEC civil fraud injunctions in the case, and he is suing

for reinstatement.)

Mr. Zimmerman pleaded guilty in January 1972. In

the same month, Capital General sold all the non-cash

assets of Larco to Transcontinental Oil Corp., a New

Orleans-based firm, for 225,000 shares of Transcon-

tinental stock, then worth about $540,000, and $2.5

million in notes. The shares since have risen to about

$1.2 million, but most of the stock and notes went into

an escrow account to pay off Larco creditors, says R.A.

Oxenreiter, vice president of Transcontinental Oil.

‘“‘When we bought (Larco), it was for all practical pur-

poses bankrupt,” he says.

A few months later, on April 12, 1972, Capital

General turned over to Mr. LaRue and his relatives

25,000 shares of Transcontinental Oil. The family, in

turn, agreed to return 6,000 shares of their remaining

holding in Capital General, releasing them from all

remaining debts and obligations under the original deal.

By that time, the $750,000 loan to the family by Mr.

Mize’s bank had been paid down to $433,215.64 by

Capital General. Mr. Zimmerman says he doesn’t know

exactly how the loan stands now.

App. 47

APPENDIX ‘‘H’’

Sonnett-Cross

THE WITNESS: If I may say, Judge, since this

controversy concerning the two affidavits of Mr. Block

and myself has come up, I want to clearly state that Mr.

Block and I have had several conversations since that

controversy. ,

I think that we have a fairly decent recollection of

this case at this point as to what took place, although

neither one of us remember the words. I think that in

fairness to Mr. Block that I ought to say that I can un-

derstand the circumstances under which Mr. Block

might have gotten this impression from anything I said.

But I think that it should clearly say at no time did I

ever indicate to Mr. Block the things that have been set

out in the affidavits filed by Mr. Mendina and Mr.

Matthews.

REDIRECT EXAMINATION

BY MR. GREENFIELD:

Q What did you say that may have given Mr.

Block the impression that he indicated in his affidavit?

A The only thing that I can think of is the state-

ments that I recall that I may have made and probably

made on several occasions to all of the defendants that

the Court looked dimly on these kind of crimes. But

there is a far cry between that and saying what appears

in Mr. Mendina’s affidavit; for example, that Judge Fay

asked me to pass on a message to the defendant. That is

App. 48

7. ONS SS ee :

absurd. And I clearly deny that. And I deny that I ever

in any way tried to insinuate to Mr. Block or anybody

else that might have happened.

I respect Mr. Block a great deal and I think that he

is an outstanding lawyer and had a great deal of in-

tegrity. And I am sure that the wording of Mr. Blocks af-

fidavit, although he never says that I said that in his af-

fidavit, but the wording that he believed that the Court

had indicated to me, may have been caused by a misim-

pression as to what I said.

Q Well, let me read you exactly what he said in

his affidavit. “‘On the eve of trial the undersigned’s was

contacted by Neal Sonnett, Assistant United States At-

torney, and to the best of the undersigned’s knowledge

advised that the Court had indicated to him, Mr. Son-

neii, that if Carey Matthews went to trial and was found

guilty he would be sentenced to do a substantial term of

years, the number of which, the affiani does not remem-

ber today, but which he .... that I knew something

from the Judge. But I did tell him what I thought I

would recommend, what I thought that Mr. Matthews

would get, as I do with all defendants.

Q Well, Mr. Sonnett, you know Mr. Block to be

experienced and a long time criminal lawyer, don’t you?

A_ Yes, sir, I do.

Q And at the time of this trial he was or at the

time of your conversation he was a seasoned, experi-

enced criminal lawyer?

A He was, yes, sir.

App. 49

Q Now, you would not expect Mr. Block to relate

or misunderstand any implication that you made by

him having said the Court had indicated that thinking,

that that indication that just came from your memory,

would you?

A I think that that question is better put to Mr.

Block. I can tell you that my respect for Mr. Block leads

me to the firm conclusion that had a prosecutor said

anything like that to him and indicated that the Judge

had passed along such a message, that Mr. Block would

have gone right to the Judge and at least confronted that

Court with it, and if that were....

Q I understood from your previous testimony, or

your questions on direct examination, that you said that

Mr. Block said that he didn’t think Judge Fay had made

the statement.

A I didn’t believe it, either.

MR. BATES: You may inquire.

REDIRECT EXAMINATION

BY MR. GREENFIELD

Q Immediately after that information you had a

discussion with Mr. Matthews, didn’t you?

A Yes, sir.

Q And immediately after that discussion Mr.

Matthews decided that he would plead guilty, and he

went to see Mr. Block; is that right?

App. 50

rr Py ee ee

Q Mr. Mandina, I show you an affidavit and the

signature on that affidavit which is dated the 10th of

June, 1975 and I ask you if that is your signature?

.... some manner there had been some indication to

Neal that there would be a substantial number of years

in the event that he was found guilty.

Q Now, this impression that you had disturbed

you, didn’t it?

A I don’t know what you mean by “disturbed

be)

me.

Q You went right to the telephone and you called

up Mr. Matthews?

A_ Yes. As I do when [ hear anything of that nature

from any prosecutor.

Q And you conveyed to Mr. Matthews in that

telephone conversation that impression, didn’t you?

A What impression? The impression that I got

from Mr. Sonnett?

Q The impression that you had gotten from Mr.

Sonnett that the Court had indicated that in the event

of a finding of guilty, a long prison term would follow.

A_ I did convey that and I also told Carey at that

time, if I can remember, that I don’t know if the Court

had said it or whether this was Neal talking or whatever

it is, but I wanted him to....

App. 51

A He wanted to plead guilty, then under those cir-

cumstances that was a pretty good deal.

Q And you would not have taken any steps before

Judge Fay to upset that deal, would you?

A No, sir.

Q Did you have any further discussions before

your appearance before Judge Fay with Mr. Sonnett

about that impression that you had gotten from him as

to the indication from Judge Fay?

A Not that I can recall.

Q So then as a matter of fact, even after refreshing

your recollection as to your testimony and your cross ex-

amination, I would like to ask you now, I want to read

this statement to you again and ask you that in light of

everything now, if it is still a true statement: “On the

eve of trial the undersigned was contacted by Neal Son-

nett, Assistant United States Attorney, and to the best

of the undersigned’s knowledge, advised that the Court

had indicated to him, Mr. Sonnett, that if Carey

Matthews was tried and was found guilty, he would be

sentenced to a substantial term of years, the exact num-

ber of which affiant does not remember today, but which

he believes to be in excess of ten years.”’

A That is the same thing that I have been telling

you I think for the last hour or thirty minutes, how ever

long we have been here. That is true and it required the

elaboration that you or Mr. Gates have brought out.

App. 52

eee CR BGs

BY MR. GREENFIELD:

Q Now, Mr. Mandina, did you and Mr. Matthews

have several calls and discussions with Mr. Block on

that date?

A I only remember the one.

Q Well, would you please teil us what your

recollection is as to that conversation?

A Well, Mr. Block called and indicated that he

had had a discussion with Mr. Sonnett and that Mr.

Sonnett had indicated to him that Judge Fay had in-

dicated to Mr. Sonnett that if Mr. Matthews was con-

victed on any one count he would get at least, I believe,

ten years in prison. And in view of the fact — that fact

— what did Mr. Matthews want to do. And he felt that

that was important that he knew that occurred.

Q_ And did Mr. Block indicate that there was any

question in his mind that the information that he was

conveying on to Mr. Matthews was information which in

reference to an indication or a statement made by Judge

Fay was passed on through Neal Sonnett?

A Well, I don’t think that he could evaluate

whether Judge Fay had made the statement. We all ob-

viously believe that Judge Fay did made the statement.

The question then became, had he, or how did he find

out, or whatever. And we asked Mr. Block that. ‘‘What

did you think?” And he said, ‘“‘Well, I don’t think he

made the statement, but I don’t know.” And I believe

that was the tenor of the conversation. He did not know

whether Judge Fay had made the statement or not.

App. 53

Q But he indicated that Sonnett had told him

that the statement had been made or an indication had

been made?

A That is what he said. He said the Judge told

that to Mr. Sonnett.

MR. GREENFIELD: I have no further questions,

Your Honor.

....1n the form of a threat that the judge wanted to

convey to the defendant somehow?

A I don’t know whether to say I felt that it was a

threat, because I don’t know what sentence you could

get for what was in the indictment.

In other words, it may be ten years, it may be that

Judge Fay thought that was a light sentence. I did not

feel that way. I thought that it was threatening in

nature. Mr. Block conveyed that to me. I mean, that was

the purpose of the call.

Q But you had a discussion, as I understand from

what you said before, that Mr. Block said he could not

evaluate whether Judge Fay had made the statement,

but he did not think he had made it.

A No. I said that Mr. Block could not have

evaluated it. I assume he evaluated it for himself.

Q But I understood from your previous testimony

here that you said that Mr. Block said that he didn’t

think Judge Fay had made this statement.

App. 54

A_ I believe he did indicate that when I asked him.

I said, ‘‘Well, Irwin, what do you think about all that?”

and he said, ‘‘Well, I don’t think that he made the state-

ment; but I don’t have any way....

THE WITNESS: Where you plead guilty but you

are not guilty, or you say that you are not guilty. No, at

one point I am sure he said, ‘“‘I can plead, you know, un-

der North Carolina, and I would not be sentenced. I will

get probation.”

I am sure he told me that, but, you know, at that

time it was — I don’t know, it was kind of like over.

Q_ I beg your pardon?

A It was over then. If I am not mistaken, he may

have pleaded that same day. If I am not mistaken, the

call came in in the afternoon and he made up his mind

and that was the end of it.

Q In any event, in the call from Mr. Block, Mr.

Block did not say, in complete, unqualified language,

that Judge Fay had conveyed a message to Mr. Sonnett

through Mr. Block to Mr. Matthews that the defendant

Matthews, if he went to trial and were convicted, would

get at least ten years?

A He said specifically that he had a discussion

with Mr. Sonnett and Mr. Sonnett had talked to Judge

Fay and Judge Fay had indicated to him that if

Matthews was found guilty on any one count he would

give him at least ten years in jail.

App. 55

A Yes, sir.

Q And Mr. Mandina, in your affidavit you said

this, and I would like to ask you if you still believe that

statement to be true:

“I know from my own personal knowledge from the

discussions with Mr. Block on January 7th as

hereinabove related and thereafter with Mr. Matthews,

that Mr. Matthews would never have entered a plea of

guilty to any count of the indictment as he was innocent

of all counts thereof, and only did so on the alleged

threat relayed by Assistant U.S. Attorney Neal Sonnett

to Irwin Block, Mr. Matthews’ attorney, and thus to Mr.

Matthews, that a ten-year sentence awaited him if

convicted.”

Do you believe that is still a true statement?

A Unequivocally, I believe it.

MR. GREENFIELD: No further questions.

THE COURT: Do you wish to cross on that? It

seems like it was a new area.

MR. BATES: Yes, your Honor, I would.

RECROSS EXAMINATION

BY MR. BATES:

Q What is the basis of that statement?

App. 56

A Just prior to the call, Mr. Bates, we had

thoroughly discussed and decided, because we were

partners for a number of years, that certainly it was

probably the most, obviously the most damaging and

toughest thing that ever happened to Carey during our

partnership. The other defendants who prior to this,

particularly Ben Dobson, had indicated that they would

support Matthews and that their testimony would be

favorable to him, and particularly Dobson. We could not

find him the last few days before trial. He ....

Q Mr. Matthews, on the 7th, when you received

the telephone call from Mr. Block, what conversation

did you have with him?

A He came on the phone extremely perturbed and

upset. The whole week he had been upset and per-

turbed. There was some 10,000 documents and he was

terribly concerned about whether or not we were ready

for trial. He came on the phone and he stated that he

had just had a conference with Neal Sonnett and he said

that he was very upset, that Sonnett had related to him

that Judge Fay had threatened a ten year sentence to

me if I went to trial, the only person going to trial, and if

I was convicted.

That is what — I don’t know how I can characterize

it — I accepted it as a threat to put me in jail for ten

years if I was convicted on any count or any number of

counts.

Q Did he express it as an impression that he had

gained from Sonnett or did he express it as a statement

that Sonnett had told him that such and such informa-

tion was conveyed to him by Judge Fay?

App. 57

A He flat out stated unequivocally... .

...months to run 9n the five years, and after which

time you will be entitled to be reinstated to the Florida

Bar, if the Court sees fit to vacate your plea, and permit

you to enter a plea of not guilty at this time, are you

ready to face the rigors of a trial and to do those things

that are necessary to defend yourself and prove your

innocence?

A Absolutely. I am prepared to go to trial within

ten days. I think that I have a right to a trial. After all,

that is all that I am asking is a trial. I think the public

has a right for me to be tried and they have a right to

know whether I am innocent or guilty. i think the Court

has a right to know whether they have been put upon in

this case, as they have, in my opinion.

Q Mr. Matthews, did you have anything what-

soever directly or indirectly to do with the mailing or the

preparing or the distribution of a proxy statement under

which you were charged on Count XIV?

MR. BATES: Objection, Your Honor.

THE COURT: Sustained.

MR. GREENFIELD: No further questions.

THE COURT: Cross examination... .

A_ Yes, sir.

Q_ And also in causing individuals te change their

testimony?

App. 58