Opinion
CASE NO. ED CV 13-99-JLS (PJW)
03-28-2017
DANIEL WILLIAM HEATH, Petitioner, v. MARION E. SPEARMAN, WARDEN, Respondent.
FINAL REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
This Final Report and Recommendation is submitted to the Honorable Josephine L. Staton, United States District Judge, pursuant to 28 U.S.C. § 636 and General Order 05-07 of the United States District Court for the Central District of California. For the reasons discussed below, it is recommended that the Petition be denied and the action be dismissed with prejudice.
This Final Report and Recommendation has been issued to address Petitioner's objections to the original Report and Recommendation. Petitioner was not given an opportunity to file additional objections, as the Court's reasoning and conclusions remain the same.
I.
SUMMARY OF PROCEEDINGS
A. State Court Proceedings
In 2008, Petitioner was convicted by a jury in Riverside County Superior Court of 400 counts of fraud and theft in connection with a fraudulent investment/securities scheme. (Supplemental Clerk's Transcript ("Sup. CT") 1030-49.) The jury also found him guilty of numerous sentencing enhancements. Petitioner was sentenced to 127 years in prison. (Reporter's Transcript ("RT") 124-141.)
Petitioner appealed to the California Court of Appeal, which affirmed his conviction and sentence in all respects, with the exception of certain pre-sentence credits. (Lodgment Nos. 2-11.) Petitioner then filed a petition for review in the California Supreme Court, which was summarily denied. (Lodgment Nos. 12-14.) He subsequently filed habeas corpus petitions in the Riverside County Superior Court, the California Court of Appeal, and the California Supreme Court, all of which were denied. (Lodgment Nos. 15-20.) B. Federal Court Proceedings
After exhausting his state court remedies, Petitioner, proceeding pro se, filed a Habeas Corpus Petition in this court, pursuant to 28 U.S.C. § 2254, raising more than 20 claims, which the Court organized as follows:
1. Trial counsel was ineffective.
2. The trial court denied Petitioner his right to due process when it denied his request for funds to hire an investigator and an expert.
3. The convictions were based on evidence that was illegally seized.
4. Petitioner's sentence was cruel and unusual.(First Amended Petition ("Petition") at 5-6 and Attachments and Exhibits to Petition.)
5. Unspecified claim.
In his Traverse, Petitioner moved to voluntarily dismiss the claims in Grounds Three through Five, with the exception of his sub-claim in Ground Three that counsel was ineffective in failing to have certain evidence suppressed. (See Traverse at 3, 30; Objections at 2 & n.1.) The Court grants Petitioner's request and, thus, will not address those claims in the Final Report and Recommendation.
II.
STATEMENT OF FACTS
The facts are taken from the unpublished decision of the California Court of Appeal in People v. Daniel William Heath and Denis O'Brien, No. G040653. (Lodgment No. 11.)
From January 1993 through April 2004, Petitioner, co-defendants Denis O'Brien, Larre Schlarmann, and Petitioner's father, the late John Heath, took in $187.6 million from over 1,600 investors in a Ponzi scheme that paid fictitious "interest" to old investors out of the funds received from new investors. The investors lost $117.8 million as a result of defendants' scheme. As the California Court of Appeal summarized.
Schlarmann pled guilty and agreed to testify for the prosecution in exchange for a 15-year sentence.
[Petitioner] and Schlarmann first met in 1982, when Schlarmann was working in the grocery business and [Petitioner] was a salesman and delivery man for a water company. In 1983, [Petitioner] became a salesman for the Independent Order of Foresters (Foresters), an organization that sold insurance and other investment products, and
where [Petitioner's] father, John Heath, already worked. Schlarmann became a mortgage broker and in 1985 moved to Big Bear Lake, where he worked as a licensed real estate broker.
Around 1989, Mike Allen, the owner of a Big Bear lodge, asked Schlarmann to find him a commercial loan, so that Allen could buy an adjoining parcel to his lodge and build cabins there. The project was eventually named Bear Manor. Schlarmann paid [Petitioner] a "handsome" referral fee in return for [Petitioner] raising $675,000 from some Foresters clients to fund the loan. Investors were to receive 10 percent interest and the loan term was supposed to be at most one year. Each investor received a recorded, fractionalized deed of trust as a security interest.
But Allen defaulted without completing the improvements, so [Petitioner] and Schlarmann foreclosed on the property. Schlarmann told [Petitioner] that if they sold the property in an unfinished condition, the investors would suffer a substantial loss. [Petitioner] suggested he and Schlarmann should complete the Bear Manor project themselves, then market the property and hopefully net a full recovery for the investors. But this would require raising more investment money in order to finish the cabins and to pay interest to current investors. Bear Manor was finished sometime before 1991.
The next project for [Petitioner] and Schlarmann was Janet Kay's Bed & Breakfast in Big Bear Lake. Schlarmann planned to build two showcase homes, one as his private
residence and one as a bed and breakfast named after his wife. [Petitioner] raised almost $4 million for the project from investors who received fractionalized trust deeds as security.
[Petitioner] used over $1 million of investors' money to construct his own home in Chino Hills.
In 1991 or 1992, Foresters terminated [Petitioner's] employment because [Petitioner] had directed Foresters' clients to outside investments.
In 1993, [Petitioner] established Heath & Associates, a financial service company to offer investments. Through direct mail and cold phone calls, the company invited people to attend informational seminars. [Petitioner] formed Private Capital Management (PCM) around 1994. [Petitioner] had investors put their money into PCM; [Petitioner] used the PCM money to make "loans" at his discretion to companies that needed start-up capital or operating funds.
The next project, Northwoods Resort, began in 1993, when [Petitioner] and Schlarmann bought an abandoned hotel project in the Big Bear area with intentions of developing it. The cost eventually ballooned from $8 million to $22 million. Investors received interests in a limited partnership. After construction and cleanup, part of the hotel opened in 1995; it was finally completed in 1998.
Janet Kay's Bed & Breakfast was never profitable and was losing $40,000 a month before [Petitioner] and Schlarmann closed it in 1994. Schlarmann wanted to sell
the property after the bed and breakfast closed, but [Petitioner] refused. [Petitioner] did not want investors to learn the business had failed and that they would suffer a loss. [Petitioner] felt such a disclosure would hurt his ability to raise more money. [Petitioner's] brochure stated that no investor had ever lost money with Heath & Associates.
By 2000, Northwoods Resort was breaking even operationally, but revenues were insufficient to cover its debt service of about $2.5 million per year.
[Petitioner] and Schlarmann continued operating Bear Manor until their arrest in 2004. During that time, Bear Manor lost money. [Petitioner] used PCM investment money to cover Bear Manor's operational losses, but did not show the cash infusions as loans on the property's books.
Other money-losing projects pursued by [Petitioner] and Schlarmann and financed with investor money included a golf center and 36 Quizno's restaurants.
Fraud Perpetrated on Investor Victims
In the space of 11 years, from January 1993 through April 2004, defendants took in $187.6 million from about 1,500 people in a Ponzi scheme in which investors were paid money that came from other investors' funds. The investors were ultimately paid $69.8 million and lost $117.8 million of principal.
Linda Brown was the marketing director for Heath & Associates. She was originally hired as a telemarketer who, along with as many as 13 other telemarketers, phoned
people over age 50 and invited them to a free lunch (or dinner) and financial planning seminar. In a scripted solicitation, the telemarketers explained that the seminar would discuss maximizing interest, alternatives to certificates of deposit, reducing taxes, protecting assets, making safe investments, "and other assets [of concern] to the senior community." Invitees were assured that no business would be conducted at the seminar, the meal would be great, and [Petitioner] was an excellent, knowledgeable speaker. Telemarketers were awarded a bonus when someone signed up to attend a seminar or a personal consultation with a Heath & Associates "financial planner." Advertisements were also run for the seminars.
Brown's husband invested his retirement savings of $487,000 with [Petitioner] in 2002. Brown asked [Petitioner] to find some good investments for the money. She told him not to invest all the money in PCM, and that she wanted a $150,000 annuity and a government insured investment. Unbeknownst to Brown, however, [Petitioner] invested most of the money in PCM and the balance in three companies owned by [Petitioner].
Once, a telemarketer saw on O'Brien's desk an interoffice memorandum about the company's financial troubles and the need to hold off clients who asked about delinquent interest payments. At an office party, as O'Brien left the room, he chuckled, rubbed his hands with a sinister motion, and told the telemarketers, "Oh good. Now we can go rip off some old people."
A Heath & Associates salesperson testified he introduced O'Brien at seminars as being in the top one percent of financial planners in the country.
James Byrne, a law school professor and an expert on commercial fraud, opined that defendants' sale of investments involved commercial fraud. Byrne reached this conclusion after reviewing the receiver's reports; transcripts of defendants' presentations to and interviews with victims; defendants' contracts with victims; and defendants' advertisements, prospectuses, and other explanations of the investment written for the public. The advertisements unrealistically offered an investment return that was triple the return on a certificate of deposit, was guaranteed for five years, and was impervious to market fluctuations, and also promised that the investor's principal would be secure. The advertisements played on seniors' fears ("Will you survive the next five years?") and promised inside information ("Come learn what the banks won't tell you").
Byrne had reviewed a DVD of O'Brien giving a seminar presentation that was clearly tailored for seniors and laid the basis for follow up personal consultations to talk about specifics. O'Brien made references and allusions to particular concerns of "seniors: loss of money [and health], inflation, the cost or need for expense of long-term care, and relying on children." O'Brien appeared to be an eminently professional, experienced, and knowledgeable "person who was on the investor's side" and
would offer advice with no fees and select the right program for the investor taking into account all relevant considerations. O'Brien's presentation denigrated as unsuitable all forms of investments (ranging from bank accounts to real estate to stocks) except for a single remaining vehicle-secured corporate notes.
Byrne opined the investment vehicle was "a gamble in untried or start-up or risky enterprises ... offered under the guise of a safe investment." There was no coherent business plan explaining how returns could be paid from revenues or asset increases or appreciation nor any evidence the security for the debt had been filed and perfected. The prospectus contained no substantial financial data.
Byrne opined the returns resulted from Ponzi financing. In a Ponzi scheme, the fraudster pays victims out of funds that were not earned by the enterprise, but creates the illusion the payments were made from the enterprise's profits. In reality the payments are made from new investments in the enterprise made by victims. The payments add to the investment's credibility and buy time for the fraudster. But the scheme is not economically sustainable and must collapse, "absent a miracle." Often the fraudster hopes to "use his or her charisma to keep people ... believing" and makes "increasingly desperate investments" trying to "save the day."
Byrne testified that often the perpetrators of commercial fraud are articulate, charming, likeable, and
charismatic, and convey an aura of authority and trust. They claim expertise in an area, suggest the victim does not have the necessary expertise, and offer the victim a very special, unique opportunity. Once a victim has trusted someone and acted in reliance on that trust, the victim may experience denial and embarrassment about admitting their judgment was wrong, so that the victim can become an "ally of the fraudster." "One of the strongest tools in the repertoire of retail fraudsters is actually paying the promised returns." The perpetrator may distract the victim from asking the right questions by making the investment confusing, elaborate or technical, or focusing on red herring issues. Elder people are particularly vulnerable to retail commercial fraud because often they are lonely, "their judgment is not as sharp as it once was," and they are afraid about their future, their finances, their dependence upon others, and their ability to care for themselves.
Many investor victims testified at trial about the losses they suffered by entrusting their money to defendants. For example, Clayton Olson was a 69-year-old retired mail carrier at the time he invested in the Northwoods Resort at Big Bear. Olson first attended a Heath & Associates seminar at a Sizzler restaurant in Hemet, in a room full of senior citizens. In a private consultation, [Petitioner] advised Olson and his wife that Heath & Associates would pay better interest than the Olsons' existing Franklin Funds annuity. [Petitioner]
promised the term of the investment would be only five years. Five years later, the Olsons tried to withdraw their money many times, but [Petitioner] said they had committed the money for ten years.
Alberta Overbey was a 72-year-old retiree when she invested almost all her money in PCM, after attending a Heath & Associates free luncheon seminar at a Marie Callender's restaurant, along with about 20 other senior citizens. [Petitioner] had Overbey sign a letter (written by [Petitioner]) to her former financial advisor telling him not to contact her again.
Michalina Ferrell was a 75-year-old widow when she met with O'Brien for a private consultation. O'Brien seemed honest and trustworthy; he even discussed religion and philosophy with Ferrell. The only investment O'Brien offered Ferrell was PCM "guaranteed" notes. He helped her cash in her annuities so she could invest in PCM; O'Brien said an investment in PCM was as safe as an annuity, but earned more interest.
The testimony of Olson, Overbey, Ferrell, and many other victims showed that defendants targeted senior citizens, pretended to be independent financial advisors, and assured the prospective investors that the investments were safe. Defendants often did not provide any documentation for the corporate notes besides marketing materials and brochures. Defendants did not disclose: that investors' money would be invested in unprofitable, start-up, and/or [Petitioner]-owned companies; that new
investor money would be used to pay old investors; that Heath & Associates had received desist and refrain orders (described in more detail below); or that the securities were not qualified with state or federal agencies. If investors had known this information, they would not have given their money to defendants for investment.
Monies borrowed by PCM were commingled and loaned to various Schlarmann entities and other companies without Uniform Commercial Code 1 (UCC-1) financing statements to secure them.
Securities Law Violations
1. Expert Testimony on Federal and State Securities Laws
Martin Murphy, attorney and assistant regional director of the SEC, testified that federal securities law regulates the offer and sale of securities (including notes) and generally requires an issuer to make disclosures in a prospectus filed with the SEC and delivered to the customer, which includes all material information a reasonable investor would want to know. One exemption from this disclosure requirement applies to a private placement, i.e., a nonpublic offering, where the offer is not made to the public (e.g., by advertisement, publication, solicitation, circular, or public seminar) and the security is sold to no more than 35 people (other than accredited investors, i.e., purchasers meeting certain income and net worth requirements or preexisting clients) who receive some limited disclosures. The issuer must make a notice filing
of the private placement with the SEC. Brokers and dealers, as defined in the applicable statute, are generally required to register with the SEC.
Raymond Burg, a retired supervisory attorney with the Department of Corporations, testified that while "federal securities law is basically a disclosure statute," California securities law has a higher standard and requires that an offering be "fair, just and equitable to both [the] prospective investor and to the public at large." In order to make a qualified public offering in California, a start-up company, having no track record, would have to show an adequate business plan demonstrating foreseeable profitability within the next three years in a financial forecast prepared by a certified public accountant. A "blind pool company," whose planned business is to invest investors' money in unspecified future projects, would not be qualified to offer and sell securities in California. Nor would a permit be issued for a start-up company which intends to use new investor money to pay interest to old investors, as that would be considered fraudulent and a Ponzi scheme. Under California law, a securities transaction may be exempt from qualification if it is a private offering under Corporations Code section 25102, subdivision (f). A private offering is made with no public advertising and to no more than 35 investors (who must each have a prior personal or business relationship with the issuer), other than purchasers meeting certain net worth requirements or
who are officers or directors of the issuer. Under the statutory concept of "integration," the 35-investor limit cannot be avoided by creating separate artificial funds for a "common scheme of financing for one business plan." Public advertising includes telemarketing, brochures, seminars, and radio and newspaper advertisements. In addition, brokers and dealers are required to obtain a license from the Department of Corporations.
Based on Burg's review of the receiver's report, promotional materials, a limited partnership agreement, a videotape of a seminar presentation, and a "purported" state securities filing, he opined defendants would have been denied a permit because they lacked: any audited financial statements; an adequate track record or financial forecast; and any evidence of disclosures to investors (including disclosure of the desist and refrain orders discussed below). He further opined the transactions were not private offerings because the elderly investors did not meet the prior personal or business relationship criteria, [Petitioner] used public advertising, and many offerings were integrated. He also opined Heath & Associates acted as a broker-dealer selling securities of the issuer, PCM.
Burg testified that a desist and refrain order from the Department of Corporations notifies an issuer that it must stop selling unqualified and nonexempt securities, and notifies investors of their right to sue for rescission of the transaction. Unless the order alleges a crime, it does not prohibit the issuer from legally selling securities in
the future (i.e., through licensed broker-dealers selling qualified or exempt securities or engaging in exempt transactions), so long as the existence of the order is disclosed to future investors.
2. Violations by Defendants
To raise the initial $12 million for the Northwoods Resort project, [Petitioner] suggested the money be raised in six private placements, each limited to 35 persons, selling interests in six separate limited partnerships. If the hotel was successful, [Petitioner] and Schlarmann (and to a much lesser extent, three other persons) would reap the profits, while the investors would simply be paid back on their notes with the promised interest.
In the mid-1990's, [Petitioner] and Schlarmann consulted with a securities lawyer for the first time. The attorney, Ronald Lazof, told them the investments they were offering were securities. The attorney said they had violated the securities law and, to achieve compliance, could refund all the investment money and start again. He advised them of the legal requirements for a private placement, including the limit of 35 accredited investors, the concept of integration, and the prohibition on advertising. He told them that with Northwoods Resort, they had essentially asked investors to provide venture capital and should have given them at least a majority controlling interest and a preferred return. [Petitioner] told Schlarmann that the investors would not buy equity
interests, as opposed to debt instruments, because they wanted an income stream.
In March 1998, the Department of Corporations served two desist and refrain orders on [Petitioner], Heath & Associates, PCM, and two other entities enjoining them from selling unqualified securities and acting as unregistered brokers or dealers. In a stipulated settlement, [Petitioner] waived his right to a hearing or an appeal, but did not admit any violation or liability, and the Department of Corporations stipulated the desist and refrain orders did not prevent [Petitioner] and the entities from offering or selling properly qualified or exempted securities.
In early 2003, First Trust was the trustee for the individual retirement accounts (IRA) of about 860 persons who had investments or representatives associated with Heath & Associates or PCM. First Trust had no investment discretion, but instead took direction from account holders on what investments they had chosen and who they had appointed as an agent. [Petitioner] was the financial representative on 221 accounts and O'Brien on 253 accounts. In February 2003, James Hoy, deputy general counsel for First Trust, reviewed a letter from a law firm whose client had been trying in vain for over a year to get information from [Petitioner] about liquidating an investment. The letter mentioned desist and refrain orders. Hoy had trouble contacting [Petitioner], but finally reached him. Due to Hoy's concerns about the desist and refrain orders
and [Petitioner's] lack of responsiveness and failure to provide updated offering materials, First Trust put a freeze on new accounts or purchases of investments sponsored by [Petitioner]. Hoy received a private placement memorandum associated with PCM which said some of the interest paid to current investors would come from subsequent investors' money and which did not disclose the desist and refrain orders. Hoy found no documentation of compliance with the desist and refrain orders.
To learn more about the desist and refrain orders, Hoy set up a conference call between First Trust and [Petitioner] and their respective attorneys. A transcript of the tape-recorded call was played for the jury, including [Petitioner's] explanation of why (in his view) the orders had no basis and why he could not be ordered to stop doing something that was legal.
In March 2003, First Trust sent a letter to all investors notifying them of the desist and refrain orders. Many investors asked Heath & Associates for their money back. Heath & Associates' office manager and other staff were instructed to tell investors "that everything had been taken care of," and if an investor still wanted to speak to a representative, to take a message and let the investor speak in more detail with a representative. [Petitioner] and O'Brien told employees and investors that the desist and refrain orders had been "all cleared up" and there had been no basis for the orders. Heath & Associates found a
new IRA administrator and pressured employees to get sales up.
In July 2003, Rose Hardy, investigator of consumer complaints for the Department of Insurance, advised [Petitioner] that the department had received complaints about his agency and would need assurances he was not guilty of elder abuse. [Petitioner] eventually responded to her and asserted that his investments and salespersons were exempt from the securities rules.
In April 2004, the SEC filed a lawsuit against [Petitioner] and O'Brien.
The Defense Case
Several co-workers testified on O'Brien's behalf that he seemed to be simply a sales representative and not a supervisor, manager, or officer of Heath & Associates. [Petitioner], rather than O'Brien, was often the main speaker at seminars. [Petitioner] testified he told O'Brien a securities license was not necessary, and that PCM was exempt from licensing and registration requirements.
[Petitioner] testified at length in his own defense. While working at Foresters, he acquired an insurance license and a securities license. In the 1980's, he met Schlarmann at church. After Mike Allen defaulted on the Bear Manor loan, [Petitioner] met with each investor and disclosed "what was going on with the property" and that payments would be suspended. Payments were eventually resumed. Because Schlarmann was a licensed real estate
agent, [Petitioner] believed the investments were regulated by the Department of Real Estate and were not securities.
After Foresters terminated [Petitioner's] employment in 1991, [Petitioner] sold insurance as an independent agent; he had continued his contacts with some former Foresters clients and also employed a cold calling service. Schlarmann's projects seemed "viable" to [Petitioner]. [Petitioner] received a fee for bringing investors to Schlarmann.
At the time [Petitioner] began raising $12 million for the Northwoods Resort venture, he still thought the transaction was regulated by the Department of Real Estate. [Petitioner] "decided to set up shop ... as a financial services company," opened a Heath & Associates office, and started using seminars to reach investors. He bought names of potential investors from list companies and reached them through direct mail and cold calls. He looked for people with higher income and assets who had money to invest. He funded Bear Manor's operating losses because he and Schlarmann did not expect a brand new facility to be immediately profitable. He and Schlarmann were confident in their projects and expected them to lose money in the short run.
[Petitioner] started PCM in order to branch out from Schlarmann's real estate projects and to start investing in medical companies as well. [Petitioner] consulted Lazof, the securities attorney, and explained he wanted to form an entity to raise funds and invest money in various projects
at [Petitioner's] discretion. Lazof did the incorporation and all necessary investment documents. Lazof told [Petitioner] he could come within an exemption from the broker-dealer registration requirement if he acted as a principal of the issuer.
When the Department of Corporations (the Department) served [Petitioner] with desist and refrain orders, [Petitioner] met with an attorney named Mark McDonald. McDonald told the Department that [Petitioner] believed he had complied with securities exemptions since 1995, based on the work of attorney Lazof, and that [Petitioner] planned to continue to do so. The Department replied that if [Petitioner] was complying with an exemption, he could continue making offerings. [Petitioner] did not admit any violation of any statute in the stipulated settlement.
[Petitioner] then received a letter from the district attorney notifying him he was being investigated for fraud. [Petitioner] again consulted McDonald. The investigator closed the investigation after meeting with [Petitioner] and McDonald.
By 1999, [Petitioner] felt PCM had grown to such an extent, he needed to go to the next level, incorporate it, and make it a successful investment fund. He consulted a law firm about doing a $100 million public offering to take advantage of the coming growth period in real estate.
[Petitioner] did not tell O'Brien about the desist and refrain orders until 2003 when First Trust sent its notification letter to investors; [Petitioner] explained he
had thought the issue was resolved and he was working with attorneys to settle it again. Although [Petitioner] knew that new investor money was being used to fund operational shortfalls and debt service, he did not share this information with O'Brien.(Lodgment No. 11 at 4-16.)
[Petitioner] was adamant he had intended to return the investors' money to them eventually.
Prosecution Rebuttal
Lazof testified he prepared incorporation and stock issuance documents for PCM. He would never have told a client that these documents could be used to pursue a public offering through telemarketing or selling older people secured corporate notes as the best investment.
III.
STANDARD OF REVIEW
The standard of review in this case is set forth in 28 U.S.C. § 2254:
An application for a writ of habeas corpus on behalf of a person in custody pursuant to the judgment of a State court shall not be granted with respect to any claim that was adjudicated on the merits in State court proceedings unless the adjudication of the claim--
(1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States; or
(2) resulted in a decision that was based on an unreasonable determination of the facts in light of the evidence presented in the State court proceeding.28 U.S.C. § 2254(d).
A state court decision is "contrary to" clearly established federal law if it applies a rule that contradicts Supreme Court case law or if it reaches a conclusion different from the Supreme Court's in a case that involves facts that are materially indistinguishable. Bell v. Cone, 535 U.S. 685, 694 (2002). To establish that the state court unreasonably applied federal law, a petitioner must show that the state court's application of Supreme Court precedent to the facts of his case was not only incorrect but objectively unreasonable. Renico v. Lett, 559 U.S. 766, 773 (2010). Where no decision of the Supreme Court has squarely decided an issue, a state court's adjudication of that issue cannot result in a decision that is contrary to, or an unreasonable application of, Supreme Court precedent. See Harrington v. Richter, 562 U.S. 86, 101 (2011).
Petitioner raised his claims in his state habeas petitions, but the state supreme court did not explain its reasons for denying them. (Lodgment No. 20.) Nor did the state appellate court. (Lodgment No. 18.) The Riverside County Superior Court, however, did, denying them on the ground that Petitioner had not made a "prima facie" showing that he was entitled to relief. (Lodgment No. 16.) That decision constitutes an adjudication on the merits of the claims. See Phelps v. Alameida, 569 F.3d 1120, 1125 n.8 (9th Cir. 2009) (holding state court's rejection of claim for failure to state prima facie case constitutes denial on the merits). Nevertheless, because the superior court did not explain its rationale for concluding that Petitioner had not established a prima facie case for relief, the Court will conduct an independent review of the record to determine whether the decision was objectively reasonable. See Murray v. Schriro, 745 F.3d 984, 996-97 (9th Cir. 2014); see also Godoy v. Spearman, 834 F.3d 1078, 1084 (9th Cir. 2016) ("[W]e doubt the denial of Godoy's habeas petition can properly be considered a reasoned decision, since it states only that Godoy had 'fail[ed] to state a prima face case for relief.'"). In doing so, the Court will uphold the state court's decision so long as there is any reasonable basis in the record to support it. See Richter, 562 U.S. at 102 ("[A] habeas court must determine what arguments or theories . . . could have supported[] the state court's decision; and then it must ask whether it is possible fairminded jurists could disagree that those arguments or theories are inconsistent with the holding in a prior decision of this Court.")
IV.
DISCUSSION
A. Ineffective Assistance of Counsel
In Ground One, Petitioner alleges that he received ineffective assistance of counsel in violation of the Sixth Amendment based on 20 instances in which he claims his counsel performed deficiently before and during trial. (Petition, Attachment A at 1-37.) In Ground Three, Petitioner alleges an additional instance of ineffective assistance, namely, that counsel was deficient in litigating a Fourth Amendment search and seizure claim. (Petition, Attachment C at 6-7; Objections at 29.) For the following reasons, the Court concludes that there is no merit to any of these claims.
Although many of Petitioner's ineffective assistance sub-claims are, in fact, overlapping and intertwined and are supported by the same evidence, the Court has enumerated all 20 sub-claims in response to Petitioner's objection that the Court failed to address some of his claims in the original Report and Recommendation. (See Objections at 16, 19, 21.)
The Sixth Amendment right to counsel guarantees not only assistance, but effective assistance, of counsel. Strickland v. Washington, 466 U.S. 668 (1984). In order to prevail on a claim of ineffective assistance of counsel, Petitioner must establish that counsel's performance fell below an "objective standard of reasonableness" under prevailing professional norms and that the deficient performance prejudiced the defense, i.e., that "there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different." Id. at 687-88, 694.
Judicial review of counsel's performance is highly deferential, and Petitioner must overcome the presumption that the challenged action might be considered sound strategy under the circumstances. Id. at 689. The test is not whether another lawyer with the benefit of hindsight would have acted differently, but whether trial counsel made errors so serious that Petitioner was essentially denied his right to counsel as guaranteed by the Sixth Amendment. Id. at 687, 689; see also Rompilla v. Beard, 545 U.S. 374, 381 (2005) ("In judging the defense's investigation, as in applying Strickland generally, hindsight is discounted by pegging adequacy to 'counsel's perspective at the time' investigative decisions are made, and by giving a 'heavy measure of deference to counsel's judgments.'") (citations omitted).
The Court applies an additional layer of deference to a state court's decision regarding an ineffective assistance claim. See Knowles v. Mirzayance, 556 U.S. 112-13 (2009) (noting "the doubly deferential judicial review that applies to a Strickland claim evaluated under the § 2254(d)(1) standard"). As a result, Petitioner must not only show that the state court erred in applying Strickland to the facts of his case, but also that the decision was objectively unreasonable. Woodford v. Visciotti, 537 U.S. 19, 25 (2002) (explaining, under 28 U.S.C. § 2254(d), "a federal habeas court may not issue the writ simply because that court concludes in its independent judgment that the state-court decision applied Strickland incorrectly"). Further, as the Supreme Court has explained, "because the Strickland standard is a general standard, a state court has even more latitude to reasonably determine that a defendant has not satisfied that standard." Knowles, 556 U.S. at 123 (citing Yarborough v. Alvarado, 541 U.S. 652, 664 (2004)).
1. Failure to Review Pre-Trial Discovery
Petitioner alleges that his counsel was ineffective for failing to properly prepare for trial. He contends that counsel did not review over 500 boxes of evidence that were seized from Petitioner's and Schlarmann's offices. He notes that counsel failed to take Petitioner up on his offer to review the documents and summarize them for counsel before trial. According to Petitioner, as a result of counsel's failings, counsel was unable to develop a defense, effectively cross-examine the witnesses, and/or rebut contentions made during trial by the prosecution. (Petition, Attachment A at 4-5.) These claims are without merit.
Obviously, counsel had a duty to investigate this case. Reynoso v. Giurbino, 462 F.3d 1032, 1112 (9th Cir. 2006). That duty may have included examining the 500 boxes of documents that were taken from Petitioner's and Schlarmann's offices during the investigation or delegating that task to someone else on the defense team, including Petitioner. The problem with Petitioner's claim, however, is that he does not set out what relevant evidence counsel missed. He does not tell the Court what document or documents inside those boxes would have aided his defense. That is his burden. See Strickland, 466 U.S. at 687 (noting a petitioner bears the burden of proving an ineffective assistance of counsel claim); see also McQueen v. Swenson, 498 F.2d 207, 220 (8th Cir. 1974) (holding petitioner has the "burden of showing that the missing evidence would be helpful"). Absent such evidence, this claim amounts to nothing more than vague speculation and is rejected on that ground.
As Petitioner points out, the District Attorney provided defense counsel with 27 boxes of documents that were relied on by the prosecution in charging and prosecuting the case. (Petition, Attachment A at 5.) Thus, it is not clear that counsel needed to go through the other 500 boxes of documents that the government seized from Petitioner but that it did not rely on. See Hendricks v. Calderon, 70 F.3d 1032, 1040 (9th Cir. 1995) (noting duty to investigate is not "limitless").
2. Failure to Interview Defense Witnesses
Petitioner claims that counsel was ineffective for failing to interview over 100 witnesses whom he claims he included on a list that he provided to counsel in 2006. (Petition, Attachment A at 6.) He offers no affidavits from any of these witnesses; instead, he summarily concludes that they "could either corroborate important aspects of Petitioner's testimony, counter key prosecution witnesses, rebut evidence presented by the prosecution, or minimize the inculpatory inferences from the circumstantial evidence offered by the prosecution." (Petition, Attachment A at 7.) This is not remotely sufficient to warrant habeas relief. See Dows v. Wood, 211 F.3d 480, 486 (9th Cir. 2000) (denying ineffective assistance claim for failing to call witnesses where petitioner failed to submit declaration setting out what witness would have testified to at trial). Moreover, Petitioner fails to demonstrate with any particularity how his list of CPAs, attorneys, consultants, and other business professionals would have undermined the prosecution's extensive evidence of Petitioner's fraudulent business dealings. Absent such specificity, this claim fails. See, e.g., Bragg v. Galaza, 242 F.3d 1082, 1088 (9th Cir. 2001) (finding mere speculation that a witness, if interviewed, would have provided helpful information to the defense is insufficient to establish ineffective assistance).
3. Failure to Interview Prosecution Witnesses
Petitioner contends that counsel was ineffective for failing to interview prosecution witnesses, specifically co-defendant Schlarmann. (Petition, Attachment A at 7.) He argues that Schlarmann was not telling the truth when he testified that Petitioner had committed fraud and that, had counsel interviewed him before trial, he could have impeached him more effectively on cross-examination during trial. This claim is rejected.
First, it is doubtful that co-defendant Schlarmann, who was represented by counsel and had accepted a plea deal in exchange for his agreement to testify against Petitioner, would have voluntarily agreed to an interview with Petitioner's counsel. Further, Petitioner does not explain what testimony by Schlarmann was untrue and how counsel could have exposed that at trial had he interviewed Schlarmann before trial. In fact, Petitioner testified at trial after Schlarmann and had an opportunity to rebut what Schlarmann said. Obviously, the jury did not believe Petitioner and believed Schlarmann. The Court is not empowered or inclined to review that credibility finding. See Bruce v. Terhune, 376 F.3d 950, 957 (9th Cir. 2004).
Petitioner also suggests, without evidence, that counsel failed to review Schlarmann's interview with the police that led to his plea agreement and cooperation with the prosecution. (Objections at 9.) Petitioner fails to explain what was in the interview that would have helped counsel persuade the jury that Schlarmann was not telling the truth. In the end, the Court concludes that Petitioner has not presented even a plausible argument as to why counsel was ineffective for failing to interview the Schlarmann (and the other prosecution witnesses) before trial, assuming that that is what happened.
4. Failure to Secure an Investigator to Assist the Defense
Petitioner faults counsel for not obtaining the services of an investigator, which he claims was necessary to "identify and interview potential defense witnesses, and to investigate facts which would have undermined the credibility of prosecution witnesses." (Petition, Attachment A at 8.) Petitioner's conclusory and vague statements as to what exculpatory evidence an investigator could have uncovered is insufficient to demonstrate any prejudice from the lack of a defense investigator. See Hendricks, 70 F.3d at 1042 ("Absent an account of what beneficial evidence investigation into any of these issues would have turned up, [petitioner] cannot meet the prejudice prong of the Strickland test.").
In fact, the record suggests that counsel was assisted by an investigator during the pre-trial proceedings, though there was some question as to where the funding for the investigator would come from. (See, e.g., RT 1018.)
5. Failure to Present Expert Testimony
Petitioner contends that counsel was ineffective for failing to call expert witnesses in such a "complex" case. (Petition, Attachment A at 9.) Once again, Petitioner has failed to provide an affidavit from an expert witness setting forth that he or she would have been willing to testify at Petitioner's trial and detailing what exculpatory evidence they could have provided. Without this, Petitioner's claim fails. See Dows, 211 F.3d at 486; see also Wildman v. Johnson, 261 F.3d 832, 839 (9th Cir. 2001) (rejecting claim that counsel was ineffective for failing to hire an expert without evidence that expert would have provided beneficial testimony).
6. Failure to Adequately Consult with Petitioner
Petitioner complains that counsel only met with him for "a few short meetings over three years." (Petition, Attachment A at 10.) He argues that the failure to tap Petitioner's "extensive and detailed familiarity with the facts and evidence" undermined the defense case. (Petition, Attachment A at 11.) This claim is also without merit.
Although "adequate consultation between attorney and client is an essential element of competent representation," Correll v. Ryan, 539 F.3d 938, 943 (9th Cir. 2008) (internal quotations omitted), there is no minimum number of meetings required between counsel and client for counsel to be deemed competent. Moody v. Polk, 408 F.3d 141, 148 (4th Cir. 2005). In light of the fact that Petitioner corresponded with his attorney regularly, giving him lists of potential witnesses and explaining his proposed defense in detailed hand-written notes, it is not clear how additional visits with Petitioner were necessary to help counsel prepare for trial. See United States v. Mealy, 851 F.2d 890, 908-09 (7th Cir. 1988) (rejecting ineffective assistance claim of inadequate consultation because the petitioner "fail[ed] to explain how the lack of consultation affected the outcome of the trial"). For these reasons, this claim is denied.
7. Failure to Prepare a Defense
Petitioner claims that counsel "failed to prepare Petitioner's defense . . . in virtually every way imaginable." (Petition, Attachment A at 13.) The record does not support this argument. While counsel may not have prepared the case Petitioner wanted, it is not true that counsel failed to present a defense at all. He tried to convince the jury that Petitioner did not intend to defraud his investors and that he was merely inept at running the investment funds. (See RT 9109, 9111, 9115, 9120, 9122.) He also called Petitioner to the stand and gave Petitioner the opportunity to explain to the jury why he was not guilty of fraud. The fact that that defense was unsuccessful is not evidence that counsel was ineffective in failing to prepare and present a defense.
8. Abandoning a Motion for a Continuance
Petitioner faults counsel for withdrawing a motion for a continuance on the day Petitioner's trial started. (Petition, Attachment A at 15-16.) First, there is no indication that the motion would have been granted, even had it not been withdrawn by counsel. Second, despite Petitioner's arguments to the contrary, Petitioner has not shown that counsel was not prepared to try the case or that obtaining a continuance would have resulted in a different, more persuasive defense, at a late date. As such, this claim is denied.
9. Failure to Address Misrepresentations in Opening Statement
Petitioner complains that the prosecutor made more than 100 misstatements in his opening statement that went unchallenged by Petitioner's counsel. (Petition, Attachment A at 17.) Petitioner, however, does not detail these allegations or explain with any specificity how they prejudiced his case. Further, the opening statements were not transcribed and, therefore, are not available to review. Finally, and importantly, opening statements are not evidence and presumably were not considered as such by the jury. For these reasons, this vague and conclusory claim does not warrant relief. See Jones v. Gomez, 66 F.3d 199, 204-05 (9th Cir. 1995) (holding vague speculation or mere conclusions without reference to the record or other documentary evidence fails to discharge a petitioner's prima facie burden for an ineffective assistance of counsel claim); James v. Borg, 24 F.3d 20, 26 (9th Cir. 1994) ("Conclusory allegations which are not supported by a statement of specific facts do not warrant habeas relief.").
The opening statements were not transcribed and, thus, are not available.
10. Failure to Conduct Cross-Examination of Witnesses
Petitioner complains that only 28 of the 91 prosecution witnesses were cross-examined by counsel. (Petition, Exh. A at 19.) This fact, however, hardly demonstrates that counsel was ineffective. His argument that counsel's cross-examination of a "key" witness was deficient because it amounted to only four pages of transcribed testimony is equally unavailing. (See Petition, Attachment A at 21-22.) In fact, as to all the witnesses, Petitioner fails to explain what benefit he would have derived had defense counsel conducted lengthier and/or more effective cross-examinations. Clearly, in no instance has Petitioner demonstrated that further cross-examination would have affected the outcome of this case in light of the overwhelming evidence implicating him in these fraudulent schemes.
11. Failure to Object to Expert Opinion Testimony
Petitioner claims that counsel was ineffective for failing to object to the testimony of prosecution expert witness Raymond Burg, which, according to Petitioner, amounted to improper opinion testimony. (Petition, Attachment A at 23-24.) Petitioner fails to explain, however, how the testimony was improper under California law or why an objection by Petitioner's counsel would have succeeded where objections by a co-defendant's attorney to the same testimony were overruled. (See RT 6307.) The failure to make a futile objection does not constitute ineffective assistance of counsel. See Juan H. v. Allen, 408 F.3d 1262, 1273 (9th Cir. 2005) ("[T]rial counsel cannot have been ineffective for failing to raise a meritless objection.").
12. Failure to Consult with Petitioner During Trial
Petitioner claims that counsel "brushed off" his attempts to discuss impeachment and rebuttal evidence during trial with regard to several witnesses. (Petition, Attachment A at 25.) Again, however, Petitioner fails to explain the substance of any of this alleged evidence. Thus, the claim is simply too vague and unsupported to merit relief. See Villafuerte v. Stewart, 111 F.3d 616, 631 (9th Cir. 1997) (denying claims of ineffective assistance that are vague and conclusory).
13. Failure to Object to Prosecutor's Closing Argument
Petitioner contends that counsel failed to object to "various misstatements" throughout the prosecutor's day-and-a-half closing argument. (Petition, Attachment A at 25.) The only "misstatement" Petitioner actually identifies, however, is a claim that the prosecutor misinformed the jury that the statute of limitations did not bar Petitioner's prosecution. In fact, as the state appellate court determined, the prosecutor was right that the statute of limitations was not a bar. (See Lodgment No. 11 at 17-23.) That ruling is binding on this Court. See Bradshaw v. Richey, 546 U.S. 74, 76 (2005) ("[A] state court's interpretation of state law, including one announced on direct appeal of the challenged conviction, binds a federal court sitting in habeas corpus.").
Moreover, as to closing argument, prosecutors are given wide latitude to argue their case based on the evidence. Even assuming that the prosecutor made some misstatements in closing, the jury was instructed that the attorneys' statements were not evidence and that it should rely on the evidence presented during the trial to resolve the case. (CT 3991.) Presumably, the jury understood that instruction and followed it. Weeks v. Angelone, 528 U.S. 225, 234 (2000). As such, Petitioner has not demonstrated that counsel's failure to object during closing was deficient or caused prejudice.
14. Opening Statement
Petitioner complains that counsel failed to outline a viable defense theory in his opening statement and that he merely told the jurors that they would "have to wait for it, but it is coming." (Petition, Attachment A at 26.) Conversely, he complains that counsel's comments in his opening statement amounted to a promise to present a defense, which was not forthcoming. Neither claim has any merit.
Because there is no transcript of the opening statements, the Court is unable to confirm whether Petitioner's assertions are accurate. Nevertheless, even assuming that they are, he has not presented enough here to warrant habeas relief. Defense counsel are not required to even make an opening statement. See, e.g., United States v. Rodriguez-Ramirez, 777 F.2d 454, 458 (9th Cir. 1985) ("The timing of an opening statement, and even the decision whether to make one at all, is ordinarily a mere matter of trial tactics and in such cases will not constitute the incompetence basis for a claim of ineffective assistance of counsel.") Obviously then, there is no constitutional requirement that counsel commit to a theory of defense in an opening statement. In fact, courts have recognized that the failure to commit to a particular defense can be a reasonable defense strategy. See Jones v. Smith, 772 F.2d 668, 674 (11th Cir. 1985) (finding attorney's decision to waive opening argument was one of reasonable trial strategy because it "left the defense uncommitted to a particular position and thus free to develop any defense that might materialize as the [prosecution] presented its case"). Because no Supreme Court case has ever held that the failure to identify the theory of defense in the opening statement amounts to ineffective assistance of counsel, Petitioner's claim necessarily fails.
15. Failure to Allow Petitioner to Present a Full Defense
Petitioner contends that counsel denied him the right to testify in his own defense when he limited Petitioner's testimony to one day instead of two weeks, as counsel had promised before trial. (Petition, Attachment A at 26-27.) Clearly, Petitioner had a right to testify. See Rock v. Arkansas, 483 U.S. 44, 51-53 (1987). And, clearly, he was afforded that right. During his testimony, he was able to explain what he did with the investments in issue and why he did it. The jury was apparently unpersuaded by his testimony and convicted him on all but one of the 400+ charges. The fact that he testified for only one day--a considerable amount of time for any defendant in a criminal case--does not demonstrate that counsel was ineffective. Like Petitioner's other arguments, this one fails because Petitioner has not specified what he was prevented from testifying about, what relevant, exculpatory evidence he needed additional time to present to the jury, and, ultimately, how it would have changed the outcome of this case. For these reasons, Petitioner has not demonstrated that counsel was ineffective in failing to allow him to present a full defense.
16. Failure to Call Important Defense Witnesses
Petitioner complains that, despite the fact that defense counsel told the jurors in his opening statement that they would hear from multiple witnesses, they only heard from Petitioner. (Petition, Attachment A at 27.) In his view, this evidences ineffective assistance of counsel.
Defense counsel's unexplained failure to present promised evidence may constitute ineffective assistance of counsel, Saesee v. McDonald, 725 F.3d 1045, 1049 (9th Cir. 2013), but "is not always an error of a constitutional dimension." Williams v. Bowersox, 340 F.3d 667, 671-72 (8th Cir. 2003). Rather, a court should "not presume ineffective assistance of counsel based solely on a failure to deliver promised testimony to the jury" but instead "analyze[ ] the significance of the failure in light of all of the circumstances." Soraich v. Montana, 264 F. App'x 654, 655 (9th Cir. 2008).
Here, Petitioner does not suggest that any particular witness or testimony was promised to the jury. Rather, he argues that counsel said "witnesses," and only one actually testified, Petitioner. In light of all the evidence in this case, the Court does not find this claimed discrepancy between opening statement and the trial to be of constitutional magnitude. It is not reasonably likely, in a long and complicated trial such as this one, that the jury focused on counsel's remark in his opening statement and held it against Petitioner in deciding the case months later.
17. Failure to Call Expert Witnesses
Petitioner takes exception to counsel's failure to hire an expert and have the expert testify at trial. He claims that counsel told him before trial that he planned to hire an expert and use the expert at trial. (Petition, Attachment A at 28.) Like Petitioner's other claims, however, he does not provide an affidavit setting out the expert's proposed testimony and explain how that testimony would have caused the jury to render a different verdict. Absent such information, this claim fails. See Dows, 211 F.3d at 486; Wildman, 261 F.3d at 839.
18. Failure to Give Meaningful Closing Statement
Petitioner complains that counsel was ineffective for presenting a 35-40 minute closing argument after months of trial in the face of the prosecution's day-and-a-half closing argument. He contends that this establishes his counsel's shortcomings. Again, Petitioner does not say what counsel left out or how speaking longer would have overcome the mountain of evidence against him. Nor does he explain what theory of defense could have been employed to have affected the outcome of his case. "The Sixth Amendment guarantees reasonable competence, not perfect advocacy judged with the benefit of hindsight". Yarborough v. Gentry, 540 U.S. 1, 8 (2003). Petitioner fails to demonstrate that counsel's brief closing argument fell below that standard. As such, this claim is denied.
19. Abandonment of Petitioner
Petitioner alleges that counsel's ineffectiveness was so egregious that Petitioner was denied any meaningful assistance at trial. See United States v. Cronic, 466 U.S. 648, 659 (1984) (establishing a presumption of prejudice from ineffective assistance of counsel in rare cases amounting to a "complete denial of counsel"). In his view, his trial was nothing more than a slow plea. (Petition, Attachment A at 33-34.) The source of this claim appears to be Petitioner's belief that counsel wanted to settle the case rather than go to trial, thereby violating his "duty of loyalty" to Petitioner at trial. Petitioner cites no evidence to support this supposition. Rather, it appears that counsel simply advised Petitioner that he should try to reach a plea deal instead of facing what appeared to be certain conviction at trial in light of the substantial evidence of his guilt. Such advice does not create a conflict between counsel and client. See, e.g., United States v. Davis, 239 F.3d 283, 286-87 (2d Cir. 2001) ("[C]ompetent counsel's candid advice about the risks of going to trial" does not create an "actual conflict between advocating for his client's interests and his own"). Furthermore, the Court does not find counsel's attempt at trial to paint Petitioner as an unsuccessful entrepreneur and investment manager--rather than a sophisticated criminal intent on defrauding his investors--to be a complete denial of counsel under Cronic, as Petitioner alleges.
20. Failure to Prove Statute of Limitations Defense
Petitioner claims that counsel was deficient for failing to prove that 187 of the counts against him were barred by the statute of limitations. (Petition, Attachment A at 35-37.) As noted previously, on direct appeal the California Court of Appeal rejected Petitioner's statute of limitations argument, affirming the jury's implicit finding that the California Department of Corporations was not on notice of Petitioner's crimes in March 1998, as Petitioner had argued, but later, rendering all of the charges against him timely. (Lodgment No. 11 at 17-23.) Nevertheless, Petitioner faults counsel for failing to "discover, obtain, or marshal" additional evidence to substantiate his statute of limitations defense. (Petition, Attachment A at 36.) Petitioner's claim is conclusory and unpersuasive. He does not adequately explain how any additional evidence available to counsel at the time would have changed the outcome of his statute of limitations defense at trial or on appeal. For this reason, this claim is rejected.
21. Failure to Properly Litigate Suppression Motion
In Ground Three, Petitioner alleges that counsel was deficient in his litigation of a Fourth Amendment search and seizure claim. (Petition, Attachment C at 6-7; Objections at 29.) There is no merit to this claim.
Before he was charged by the Riverside County District Attorney in this case, Petitioner had hired a law firm to represent him. One of the lawyers from the firm that he had hired, Cammey DuPont, left the firm and went to work at for the SEC. The SEC subsequently initiated an investigation into Petitioner and his companies and filed a complaint against Petitioner in federal court. That triggered a parallel investigation by the Riverside County District Attorney, which eventually led to the instant charges. An SEC attorney, not DuPont, was cross-designated as a deputy district attorney and assisted in prosecuting Petitioner's criminal case in state court. (Lodgment No. 3.) Petitioner argues, as he did in state court, that the District Attorney's office should have been disqualified from the case because DuPont had a conflict with Petitioner and, as a result, evidence collected by the District Attorney's office was unlawful. The trial court agreed that DuPont had a conflict, but disagreed that the conflict infected the entire SEC and, consequently, the District Attorney's office. (RT 877.)
To the extent that Petitioner is trying to re-litigate the conflict of interest issue, that request is denied. The state court ruled that, under California Penal Code § 1424, the District Attorney's office was not disqualified. That ruling is binding on this Court. Mendez v. Small, 298 F.3d 1154, 1158 (9th Cir. 2002) ("A state court has the last word on the interpretation of state law.").
As for Petitioner's claim that counsel was deficient in litigating the search and seizure motion, that, too, is unavailing. Petitioner alleges no specifics as to what counsel should have done to win the motion. In lieu of specifics, he argues that counsel was "completely overwhelmed" and "out of his league." (Petition, Attachment C at 6.) Such a claim does not justify relief.
Finally, and importantly, as to all of Petitioner's claims of ineffective assistance of counsel, he has not shown prejudice, i.e., he has not established that, but for counsel's poor performance, the outcome of the case would likely have been different. Petitioner has not remotely shown that there was anything that counsel could have done to change the outcome of this case. The evidence against him was overwhelming. The testimony of the 70+ victims, co-defendant Schlarmann, the government regulators, and the experts established without doubt that Petitioner ran a Ponzi scheme for more than a decade and deliberately misled investors, using money from new investors to pay dividends to old investors. Petitioner's contention that, had his counsel done something different, Petitioner might not have been convicted, is fanciful, at best, and does not support a claim for relief. See, e.g., Spreitz v. Ryan, 617 F. Supp.2d 887, 917 (D. Ariz. 2009) ("[O]ther than asserting that counsel should have done more to develop a defense, Petitioner fails to explain what counsel should or could have done to present a different, viable defense" in light of overwhelming evidence of his guilt); Elizaldi v. Rawers, 2007 WL 963284, at *35 (E.D. Cal. Mar. 29, 2007) ("Trial counsel is not required to fashion defenses out of whole cloth or to perform impossible feats of evidentiary legerdemain in order to render effective assistance to his client."). Though Petitioner cites his numerous handwritten notes and lengthy potential witness lists, he has failed to explain how any of this evidence or testimony undermines the prosecution's substantial case against him. Petitioner simply has not shown that the state courts' rejection of these claims was not only wrong but that it was objectively unreasonable, which he must to merit relief. Woodford, 537 U.S. at 25. B. The Trial Court's Failure to Approve Funds for Defense
Petitioner intimates that the reason his trial counsel did not hire an investigator or experts is because counsel did not want to spend any portion of the $170,000 that Petitioner had paid him to represent Petitioner in this case. Petitioner contends that, by the time the case was being readied for trial, he was indigent and complains that the trial court improperly denied his requests for funds for investigators, runners, etc. He argues that the court's failure to pay for these services prevented the defense from pursuing independent avenues of investigation, developing affirmative defenses, investigating witnesses and evidence, securing experts, and properly preparing for the lengthy, complex trial. (Petition, Attachment B at 6.) Even assuming Petitioner was "indigent"--a dubious claim at best--Petitioner has not demonstrated that his constitutional rights were violated.
As noted previously, the record indicates that, in fact, defense counsel did have an investigator working for him on Petitioner's case. (See RT 1018.) --------
Nothing Petitioner has presented in his Petition suggests how a defense investigator or expert would have helped his defense. Petitioner does not show with any particularity what the investigator would have uncovered or how an expert would have convinced the jury that Petitioner's practice of using new investors' money to pay old investors in an effort to keep his Ponzi scheme afloat was proper. Absent such a showing, Petitioner is not entitled to relief. See Williams v. Stewart, 441 F.3d 1030, 1053 (9th Cir. 2006) ("For the appointment of an investigator to become constitutionally necessary, the defendant must show that the services of the investigator are required."); see also Caldwell v. Mississippi, 472 U.S. 320, 323 n.1 (1985) ("Given that petitioner offered little more than undeveloped assertions that the requested assistance would be beneficial, we find no deprivation of due process in the trial judge's decision [to deny funds for various experts and investigators].").
In his objections, Petitioner contends that he was unable to access the "massive" amount of discovery in more than 500 boxes because he was incarcerated and counsel was not given copies of all the records. (Objections at 25.) Petitioner does not suggest, and there is no evidence to show, however, that counsel was denied access to the records. Though Petitioner claims counsel could not have adequately evaluated all this evidence without Petitioner and a team of experts, he has not put forth any evidence demonstrating that there was favorable evidence within this discovery, let alone evidence that would have likely affected the outcome of this case. As such, this claim is simply too speculative and vague to warrant relief. C. Evidentiary Hearing
Petitioner asks the Court to hold an evidentiary hearing to further develop his claims, noting the voluminous discovery that he has been unable to review and develop. (Petition at 1; Traverse at 2-4; see also Objections at 4, 25, 28.) That request is denied. This Court is charged with evaluating the reasonableness of the state courts' decisions based only on the record before the state courts. See Cullen v. Pinholster, 563 U.S. 170, 180-81 (2011); see also Gulbrandson v. Ryan, 738 F.3d 976, 993 (9th Cir. 2013) ("[F]or claims that were adjudicated on the merits in state court, petitioners can rely only on the record before the state court in order to satisfy the requirements of § 2254(d)."); Stokley v. Ryan, 659 F.3d 802, 809 (9th Cir. 2011) ("Pinholster's limitation on the consideration of [a petitioner's] new evidence . . . in federal habeas proceedings also forecloses the possibility of a federal evidentiary hearing."). Further, even where an evidentiary hearing might be appropriate, it is not warranted where, as here, "the record refutes [Petitioner's] factual allegations or otherwise precludes habeas relief[.]" Schriro v. Landrigan, 550 U.S. 465, 474 (2007). Accordingly, Petitioner is not entitled to an evidentiary hearing.
V.
RECOMMENDATION
For these reasons, IT IS RECOMMENDED that the Court issue an Order (1) accepting this Final Report and Recommendation; (2) directing that Judgment be entered denying the Petition and dismissing the case with prejudice; and (3) denying a Certificate of Appealability.
DATED: March 28, 2017.
/s/_________
PATRICK J. WALSH
UNITED STATES MAGISTRATE JUDGE