RONALD A. GUZMÁN, District Judge.
Eric Bloom's motion to vacate, set aside, or correct his sentence pursuant to 28 U.S.C. § 2255 and request for an evidentiary hearing [1] are denied for the reasons stated below. The Court denies a certificate of appealability. Civil case terminated.
Bloom was tried on a 20-count indictment before a jury between February 24, 2014 and March 25, 2014. The government dismissed one count during the trial, and the jury found Bloom guilty on the remaining 19 counts of wire fraud and investment-adviser fraud. The Seventh Circuit upheld Bloom's conviction and sentence on appeal, United States v. Bloom, 846 F.3d 243 (7th Cir. 2017). The Seventh Circuit's opinion and Bloom's statement of facts on appeal (Def.'s § 2255 Mot., Ex. A, Dkt. # 1-1) provide a full recounting of the relevant facts in this case. The Court will discuss specific facts only as necessary in the text of the order.
Section 2255 provides that a criminal defendant is entitled to relief from his conviction and sentence if "the court finds that the judgment was rendered without jurisdiction, or that the sentence imposed was not authorized by law or otherwise open to collateral attack, or that there has been such a denial or infringement of the constitutional rights of the prisoner as to render the judgment vulnerable to collateral attack." 28 U.S.C. § 2255(b). A court may deny a § 2255 motion without an evidentiary hearing if "the motion and the files and records of the case conclusively show" that the defendant is not entitled to relief. Id. Relief under § 2255 is available "only in extraordinary situations, such as an error of constitutional or jurisdictional magnitude or where a fundamental defect has occurred which results in a complete miscarriage of justice." Blake v. United States, 723 F.3d 870, 878-79 (7th Cir. 2013).
"[T]he suppression by the prosecution of evidence favorable to an accused upon request violates due process where the evidence is material either to guilt or to punishment, irrespective of the good faith or bad faith of the prosecution." Brady v. Maryland, 373 U.S. 83, 87 (1963). "The [Supreme] Court has enumerated three components of a Brady violation: `The evidence at issue must be favorable to the accused, either because it is exculpatory, or because it is impeaching; that evidence must have been suppressed by the [government], either willfully or inadvertently; and prejudice must have ensued.'" Lieberman v. Scott, No. 18 C 5713, 2019 WL 2450485, at *10 (N.D. Ill. June 12, 2019) (citation omitted).
Bloom argues that the government violated its obligation under Brady by failing to disclose until sentencing the position of the Commodities Futures Trading Commission ("CFTC") that its Rule 1.25 "did not, at the relevant time, prohibit the use of leverage." (Def.'s § 2255 Mot., Dkt. # 1, at 6.) Bloom, however, has procedurally defaulted this argument by failing to raise it on appeal. Procedural default means that "[a] claim cannot be raised for the first time in a § 2255 motion if it could have been raised at trial or on direct appeal." McCoy v. United States, 815 F.3d 292, 295 (7th Cir. 2016). "A federal prisoner cannot bring defaulted claims on collateral attack unless he shows both cause and prejudice for the default." Id. "Absent a showing of both cause and prejudice, procedural default will only be excused if the prisoner can demonstrate that he is `actually innocent' of the crimes of which he was convicted." Id.
During trial, the government presented the testimony of several witnesses who either directly testified or insinuated that leverage was not permitted in an account governed by CFTC Rule 1.25. Bloom acknowledges that at the sentencing stage of the proceedings, the government offered an affidavit from Robert Wasserman, Chief Counsel for the Division of Clearing and Risk for the CFTC, stating that Sentinel's conduct had inflicted harm on the futures market. Bloom called Wasserman to testify at his sentencing, eliciting testimony from him that Rule 1.25 "neither prohibits nor permits leverage." (Def.'s § 2255 Mot., Ex. C, Dkt. # 1-3, at 12.) From this, Bloom argues that "[b]ecause of the import of Rule 1.25 in the context of Sentinel's operations and [the] trial, the [government's] failure to provide favorable evidence in the CFTC's possession to the defense . . . represents a Brady violation and warrants a new trial." (Def.'s § 2255 Mot., Dkt. # 1, at 6.) Based on Bloom's own recitation of the facts, he was aware of the CFTC's position on the issue but failed to raise any Brady argument on appeal.
Bloom's attempt to avoid the consequences of his failure is unavailing. Specifically, he argues that the "issue could not have been raised on direct appeal because the evidence pointing to the CFTC as a member of the prosecution team [, thus implicating Brady,] was not in the record" at the time of the appeal. (Def.'s Reply, Dkt. # 20, at 4) (emphasis in original). Bloom seeks discovery on the issue of whether the CFTC is or should have been considered part of the prosecution team.
In any event, defense counsel cross-examined Wasserman at sentencing on the exact issue he now raises. If Bloom believed a Brady violation had occurred, he had plenty of notice to either raise it at sentencing or include it as an issue on appeal. Bloom fails to demonstrate cause and prejudice for having failed to do so, or that he is actually innocent; thus, the issue is procedurally defaulted.
Bloom next contends that Sentinel's bankruptcy Trustee's "selective" assertion of the attorney-client privilege with respect to the testimony of Peter Savarese, a lawyer Sentinel had engaged to provide compliance and disclosure advice, violated Bloom's Sixth Amendment right to call witnesses and present a defense. According to Bloom, Savarese could have testified, among other things, "that he had reviewed Sentinel's disclosures and had found them appropriate, including with regard to the disclosure of leverage." (Def.'s § 2255 Mot., Dkt. # 1, at 23.)
In order to avoid the procedural default bar on this issue, Bloom again contends that the claim "requires development of facts from outside the record" — specifically, whether the Trustee was part of the prosecution team such that a Sixth Amendment violation can be attributed to the government. (Def.'s Reply, Dkt. # 20, at 5.) The Court is not persuaded. Not only did Bloom fail to raise the issue on appeal, he did not raise any objection regarding the Trustee's assertion of the privilege as to Savarese's testimony in front of this Court. "In order to show cause for a procedural default, [the defendant] must demonstrate that some objective factor external to the record impeded his efforts to bring a claim on direct appeal." Cochran v. United States, No. 17 C 01569, 2018 WL 2230759, at *9 (S.D. Ind. May 16, 2018). Bloom has failed to do so and thus has procedurally defaulted this claim.
Bloom contends that part of his good-faith defense to the charges against him was to present the testimony of third-party auditors from the National Futures Association ["NFA"] and McGladrey & Pullen who "audited, reviewed, and/or approved Sentinel[']s operations, set-up, structure, and accounting." (Def.'s § 2255 Mot., Dkt. # 1, at 33.) The government moved in limine to bar the auditors' testimony, and the Court, speaking to defense counsel, ruled as follows:
(2/6/14 Tr., Dkt. # 227 (No. 12 CR 409), at 62.) Bloom did not make such a showing; nevertheless, his counsel asserted several times during closing arguments that Sentinel's auditors did not find any improprieties and that Bloom was entitled to rely on that in conducting Sentinel's affairs:
(3/6/15 Trial Tr., Dkt. # 221 (No. 12 CR 409), at 2787-89.)
To succeed on an ineffective assistance of appellate counsel claim, Bloom must show that appellate counsel failed to argue "an issue that is both obvious and clearly stronger than the issues actually raised." Makiel v. Butler, 782 F.3d 882, 898 (7th Cir. 2015) (internal quotation marks omitted). Bloom has failed to make such a showing. Bloom raised five issues on appeal: "(a) the evidence was insufficient to support his convictions; (b) government misconduct tainted the convictions; (c) the district court erred in its jury instruction regarding Rule 1.25; (d) the court erred in several evidentiary rulings; and (e) his sentence was improper because the court erred in its guideline loss calculation." Bloom, 846 F.3d at 250. "When a petitioner contends that his appellate counsel was ineffective because counsel overlooked a meritorious argument, [the Court] first examine[s] the record to see whether the appellate attorney in fact omitted `significant and obvious' issues." Stallings v. United States, 536 F.3d 624, 627 (7th Cir. 2008) (citation omitted). The Court "shall not second-guess strategic decisions that were arguably appropriate at the time but that hindsight has revealed to be unwise." Id.
If Bloom is challenging appellate counsel's failure to raise trial counsel's conduct on appeal, the argument fails. Bloom's affidavit indicates that "[a]ppellate counsel informed me that trial counsel could have called auditors as witnesses even in light of the Court's ruling and that [trial counsel] may have misunderstood the ruling." (Def.'s § 2255 Mot., Dkt. # 1-2, ¶ 34.) Bloom also attests that "[a]ppellate counsel informed [Bloom] that the failure to call auditors was. . . an issue of ineffective assistance of counsel and therefore should not be raised on appeal." (Id. ¶ 35.) This represents an appropriate strategic decision. The Court did not completely bar the auditors' testimony, but held that it was admissible only if trial counsel could show that the auditors were reviewing Sentinel's books and records for the same issues for which Bloom had been charged. To the extent that trial counsel did not attempt to make this showing and Bloom believes they should have, appellate counsel made the proper decision not to raise that issue on appeal.
Bloom's assertion that appellate counsel was ineffective for failing to directly challenge the Court's ruling on appeal also fails. Bloom contends that the Court "imposed an impossible to meet requirement for relevancy; i.e., that the auditors must be shown to have looked at the precise fraudulent conduct alleged by the government." (Def.'s § 2255 Mot., Dkt. # 1, at 33.) As an initial matter, Bloom's characterization of the requirement as "impossible" is belied by his own appellate counsel's position that trial counsel could have elicited testimony from auditors "even in light of the Court's ruling. . . ." (Def.'s § 2255 Mot., Ex. B, Dkt. # 1-2, ¶ 34.) Moreover, the Court's ruling was not error; it made a determination that the substantial prejudice of having auditors from "big name" companies testify that Sentinel's book and records generally passed their reviews and audits outweighed the probative value of the testimony in the absence of Bloom's showing that the auditors were looking for or had reviewed documents relevant to the fraud that he was accused of committing. Bloom has not persuaded this Court that a challenge to its evidentiary ruling (which would have been reviewed under the deferential abuse-of-discretion standard) was clearly stronger than the issues counsel raised on appeal. Nor has he established a "reasonable probability" that an appellate challenge to the Court's ruling on the auditor issue "`would have altered the outcome of his direct appeal had it been raised.'" Stallings, 536 F.3d at 627 (citation omitted). Accordingly, this basis for relief is denied.
To prevail on an ineffective assistance of counsel claim, Bloom must meet the two-pronged test set forth in Strickland v. Washington, 466 U.S. 688 (1984), establishing that (1) his lawyer's performance fell below an objective standard of reasonableness and (2) that he was prejudiced, i.e., there is a reasonable probability that the result of the proceedings would have been different, but for his counsel's unprofessional errors. Id. at 694. Bloom claims that trial counsel was ineffective for failing to investigate or developing evidence that Bloom did not participate in interest-rate manipulation, and that Charles Mosley, Bloom's co-defendant, was alone responsible for that fraudulent conduct. But that is the exact defense Bloom offered at trial. Defense counsel stated as follows during his closing argument:
(3/24/14 Trial Tr., Dkt. # 221 (No. 12 CR 409), at 2735-36.)
Bloom now contends that trial counsel was ineffective for having failed to call Barbara MacDonald, a Sentinel employee "who could have testified that prior to Mosley's arrival at Sentinel, the assigning of interest rates among various Sentinel accounts was not performed fraudulently." (Def.'s § 2255 Mot., Dkt. # 1, at 54.) Assuming this is true, simply because the fraudulent interest-rate manipulation did not begin until after MacDonald left and Mosley took over does not mean that he was solely responsible for it. As the Seventh Circuit noted in denying Bloom's challenge to the sufficiency of the evidence on this aspect of the fraud, "[a]lthough co-defendant Mosley oversaw the daily rate setting, Bloom was aware of and involved in the practice." Bloom, 846 F.3d at 252.
Bloom also asserts that Mosley's trading often resulted in subpar, and sometimes zero, returns, and that MacDonald could have testified that "as Sentinel's previous portfolio manager, [she] had never . . . purchased or heard of Sentinel purchasing securities which earned zero interest." (Def.'s § 2255 Mot., Dkt. # 1, at 55.) This is relevant because, Bloom argues, trial counsel could have used this evidence to demonstrate that Mosley had a motive to manipulate interest rates — to cover up his poor trading performance and increase the value of his phantom stock rights.
For the reasons stated above, Bloom's § 2255 motion and request for an evidentiary hearing are denied. Pursuant to Federal Rule of Appellate Procedure 22(b), Rule 11(a) of the Rules Governing § 2255 proceedings, and 28 U.S.C. § 2253(c), the Court finds that Bloom has failed to show (1) that reasonable jurists would find this Court's "assessment of the constitutional claims debatable or wrong," or (2) that reasonable jurists would find "it debatable whether the petition states a valid claim of the denial of a constitutional right" and "whether [this Court] was correct in its procedural ruling." Slack v. McDaniel, 529 U.S. 473, 484 (2000). The Court therefore denies a certificate of appealability.
