October 12, 2012

By: Second Circuit Affirms District Court’s Authority Under All Writs Act To Restrain Funds In Anticipation Of Sentencing

The U.S. Court of Appeals for the Second Circuit recently affirmed an order of restitution by the U.S. District Court for the Eastern District of New York, denying a request by the defendant (Roy Ageloff) to release some of the funds that had been held by the Court pending his resentencing.  U.S. v. Catoggio, No. 11-3474, slip op. (2^nd Cir., October 10, 2012).

Ageloff and his partner, Robert Catoggio, engaged in a significant “pump-and-dump” securities fraud scheme from 1991 to 1998.  Eventually, Mr. Ageloff entered a plea of guilty to one count of racketeering and stipulated to a sentence enhancement of 18 levels for a fraud that amounted to losses exceeding $80 million.  His original sentence, which included $80 million in restitution under the Mandatory Victim’s Restitution Act (“MVRA”), 18 U.S.C. 3663(A), was reversed and remanded based on a finding that the order of restitution had been issued without first identifying the victims and their losses.  See, U.S. v. Catoggio, 326 F.3d 323, 324 (2^nd Cir. 2003).

On remand, the government submitted a report prepared by the National Association of Securities Dealers (“NASD”) that documented an estimated $190 million in losses suffered by more than 9,000 victims.  Prior to the resentencing, Ageloff had requested access to portions of the $536,000 that he had deposited with the court prior to his initial sentencing so that he could secure counsel of his choice.  The district court denied this request.

Mr. Ageloff was not resentenced until 2011 due to a variety of factors, including a separate prosecution of Mr. Ageloff in Florida.  Ultimately, after reviewing Ageloff’s objections to the NASD report, the district court issued a new restitution order on resentencing, ordering Ageloff to pay just over $190 million.  On resentencing, the district court affirmed its rejection of Ageloff’s request for access to any of those previously deposited funds.

In affirming the district court’s restraint of Mr. Ageloff’s funds pending resentencing, the Second Circuit found authority for restraint of funds with the All Writs Act, 28 U.S.C. §1651(a), even though the district court had not cited the Act specifically as authority for its restraint of Mr. Ageloff’s funds.  The Court, while acknowledging that the Second Circuit had not previously addressed whether the All Writs Act enables a court to restrain a convicted defendant’s property in anticipation of ordering restitution, found that courts in the Second Circuit and beyond have uniformly found such authority.

The court concluded that the district court properly exercised its authority under the All Writs Act to restrain Ageloff’s assets in anticipation of resentencing.  It noted that he had previously entered a plea of guilty to committing a crime for which restitution is mandatory under the MVRA, and that Mr. Ageloff agreed to a sentencing enhancement for fraud for causing losses of $80 million or more.  Based on these factors, it was reasonable to conclude that the eventual restitution order was certain to exceed $536,000.

The Court also found no merit in Ageloff’s argument that the refusal to release any of his money denied him the right to counsel of his choice in violation of the 6^th Amendment.  It supported its conclusion in that regard by citing U.S. v. Monsanto, 491 U.S. 600, 616 (1989), where the U.S. Supreme Court established that a pre-trial restraining order freezing the defendant’s assets did “not ‘arbitrarily’ interfere with the defendant’s ‘fair opportunity’ to retain counsel.”