United States District Court, D. South Dakota, Western Division
EDWARD J.S. PICARDI, M.D, Petitioner,
UNITED STATES OF AMERICA, Respondent.
JEFFREY L. VIKEN CHIEF JUDGE
Edward J.S. Picardi, M.D.,  filed a petition (Docket 1)
pursuant to 28 U.S.C. § 2255 to vacate or set aside his
criminal conviction in United States v. Edward J.S.
Picardi, M.D., CR.10-50092 (D.S.D. 2013). Based on the
standing order of October 16, 2014, the matter was referred
to United States Magistrate Judge Veronica L. Duffy pursuant
to 28 U.S.C. § 636(b)(1)(B). The government moved to
dismiss the petition. (Docket 23). The magistrate judge
issued a report recommending the court grant the
government's motion to dismiss. (Docket 28). Petitioner
timely filed objections to the report and recommendation.
(Docket 34). For the reasons stated below, petitioner's
objections are overruled and the report and recommendation is
adopted as modified by this order.
was charged on September 21, 2010, in a multi-count
indictment. (CR. Docket 1). On October 12, 2011, a
superseding indictment was filed. (CR. Docket 75). A second
superseding indictment was filed on August 29, 2012. (CR.
Docket 141). The second superseding indictment charged
Picardi with counts 1-5: income tax evasion for the years
1999 through 2003, inclusive, in violation 26 U.S.C. §
7201; counts 6-10: making and subscribing to a false Form
1040 Schedule B for the years 2005 through 2009, inclusive,
in violation of 26 U.S.C. § 7206(1); and counts 11-13:
failing to disclose a financial interest in a foreign
financial account with an aggregate value in excess of $10,
000 for the years 2007 through 2009, inclusive, in violation
of 31 U.S.C. §§ 5314 and 5322 and 31 CFR
§§ 103.24 and 103.27(c). Id.
Robert W.Van Norman of Rapid City, South Dakota, and Attorney
Jennifer Hinkebein Culotta, who appeared pro hac
vice from New Albany, Indiana, represented Picardi
throughout the criminal trial. (Docket 28 at pp.
3-4). On September 17, 2012, the jury trial
commenced and took 12 days to complete. (CR. Docket 197). On
October 5, 2012, the jury found Picardi guilty of all 13
counts of the second superseding indictment. (CR. Docket 196).
Post-trial, Attorney Culotta withdrew and Attorney John R.
Murphy of Rapid City joined Attorney Van Norman to represent
Picardi at sentencing. (Docket 28 at p. 15; see also
CR. Dockets 202 & 206).
7, 2013, the court sentenced Picardi to “60 months on
Counts 1-5; 36 months on Counts 6-10; and 60 months on Counts
11-13. All counts to run concurrently for a total sentence of
60 months.” (CR. Docket 250 at p. 2). The defendant was
placed on one year of supervised release on each count to run
concurrently. Id. at p. 3. On January 10, 2014, the
United States Court of Appeals for the Eighth Circuit
affirmed the convictions. (CR. Docket 264; see also
United States v. Picardi, 739 F.3d 1118 (8th Cir.
22, 2015, Picardi timely filed a petition pursuant to 28
U.S.C. § 2255 (“§ 2255 Petition”) to
vacate or set aside his criminal conviction. (Docket 1).
Attorney Murphy represented Picardi during his direct appeal
to the United States Court of Appeals for the Eighth Circuit
and through the filing of petitioner's objections to the
report and recommendation in this § 2255
proceeding. (Docket 28 at p. 32; see also
to the § 2255 Petition was a 33-page opinion letter
dated June 15, 2015, of Attorney John Colvin (“Colvin
Letter”). (Docket 1-1). The government filed a motion
to exclude the Colvin Letter. (Dockets 14 & 15). The
government filed a motion to dismiss the § 2255 Petition
pursuant to Fed.R.Civ.P. 12(b)(6) and 12(h)(3). (Docket 23).
Petitioner filed briefs in opposition to both of the
government's motions. (Dockets 25 & 27).
magistrate judge filed a report and recommendation
(“R&R”). (Docket 28). The magistrate judge
denied the government's motion to strike, indicating the
Colvin Letter would be considered as “a brief from a
lawyer representing a client-it merely sets forth the law and
the facts upon which Mr. Picardi relies in support of his
grounds for relief . . . .” Id. at p. 25. The
R&R recommended the government's motion to dismiss be
granted and Picardi's § 2255 Petition be denied.
Id. at p. 95. Picardi timely filed his objections to
the report and recommendation. (Docket 34).
completed the period of incarceration imposed in the judgment
and on September 15, 2017, his period of supervised release
expired. (CR. Docket 270). Picardi is no longer subject to
the jurisdiction of the court in the criminal case.
petition for habeas corpus must be filed while the petitioner
is in custody.” Leonard v. Nix, 55 F.3d 370,
372-73 (8th Cir. 1995) (referencing Maleng v. Cook,
490 U.S. 488 (1989)). “If a petitioner, though released
from custody, faces sufficient repercussions from his
allegedly unlawful punishment, the case is not moot.”
Id. (referencing Carafas v. LaVallee, 391
U.S. 234, 239-40 (1968) (a habeas petitioner “should
not be . . . required to bear the consequences of [an]
assertedly unlawful conviction simply because the path has
been so long that he has served his sentence”).
“Collateral consequences are presumed to stem from a
criminal conviction even after release.” Id.
Pollard v. United States, 352 U.S. 354 (1957), the
[Supreme] Court abandoned all inquiry into the actual
existence of specific collateral consequences and in effect
presumed that they existed.” Sibron v. New
York, 392 U.S. 40, 55 (1968). “[T]he Court
concluded that ‘(t)he possibility of consequences
collateral to the imposition of sentence is sufficiently
substantial to justify our dealing with the merits.'
” Id. (citing Pollard, 352 U.S. at
358). “The Court thus acknowledged the obvious fact of
life that most criminal convictions do in fact entail adverse
collateral legal consequences. The mere
‘possibility' that this will be the case is enough
to preserve a criminal case from ending ‘ignominiously
in the limbo of mootness.' ” Id. (citing
Parker v. Ellis, 362 U.S. 574, 577 (1960)
§ 2255 petition was filed on June 22, 2015, while he was
in custody under the criminal judgment. (Docket 1 ¶ 24).
Although Picardi completed his imprisonment and supervised
release prior to the court's adjudication of his §
2255 petition, “[t]he case is nevertheless not moot,
because the federal conviction could have collateral
consequences in the future, and [Picardi] was still in
federal custody when he instituted these § 2255
proceedings . . . .” Nguyen v. United States,
114 F.3d 699, 703 (8th Cir. 1997) (citing Clemmons v.
United States, 721 F.2d 235, 237 n.3 (8th Cir. 1983)).
It was Picardi's conviction which resulted in the
revocation of his license to practice medicine. This
collateral consequence “is sufficiently substantial to
justify [the court] dealing with the merits” of his
§ 2255 petition. Sibron, 392 U.S. at 55
(internal citation omitted).
court finds Picardi's § 2255 Petition is not moot.
objections are broken down into six principal categories.
Those categories are:
1. The magistrate judge was unduly prejudiced against
petitioner by referring to him as Mr. Picardi as opposed to
2. The magistrate judge erred by discounting the credibility
of the § 2255 Petition as an unsworn document and
because the petition was not supported by documentation.
3. The magistrate judge erred by confusing the identity of
the entities engaged in the financial transactions evidenced
4. The magistrate judge erred by finding petitioner's
challenge to the tax laws as void-for-vagueness was
5. The magistrate judge erred by failing to find petitioner
received ineffective assistance of counsel at trial.
6. The magistrate judge erred by recommending that no
evidentiary hearing be held on the § 2255 Petition.
court reviews de novo those portions of the report
and recommendation which are the subject of objections.
Thompson v. Nix, 897 F.2d 356, 357-58 (8th Cir.
1990); 28 U.S.C. § 636(b)(1). The court may then
“accept, reject, or modify, in whole or in part, the
findings or recommendations made by the magistrate
judge.” 28 U.S.C. § 636(b)(1).
petitioner's objections will be separately analyzed.
MAGISTRATE JUDGE WAS UNDULY PREJUDICED AGAINST PETITIONER BY
REFERRING TO HIM AS MR. PICARDI AS OPPOSED TO DR. PICARDI
objects to the magistrate judge's decision to refer to
him as Mr. Picardi as opposed to Dr. Picardi. (Docket 34 at
pp. 1-3). He argues the magistrate judge engaged in
“over-reaching” by not referring to him as Dr.
Picardi. Id. at p. 2. Picardi acknowledges the South
Dakota Board of Medical and Osteopathic Examiners revoked his
license to practice medicine but claims “it did not
require Dr. Picardi to cease using the term.”
Id. Picardi claims “[t]he magistrate appears
to have gone out of its way to demote Petitioner in status .
. . . It was improper for the magistrate to make this an
issue and it was inappropriate to find against Dr. Picardi on
the matter in the absence of clear authority justifying its
position.” Id. at p. 2-3.
footnote 1, the court addressed its finding about how to
address petitioner throughout this order. The magistrate
judge went through the same process in developing the
R&R. (Docket 28 at p. 3 n.2). The designation of a title
to petitioner throughout the report and this order does not
suggest either the magistrate judge or the court is
minimizing petitioner's right to have the content of his
§ 2255 Petition evaluated under the same criteria
afforded to every other defendant who files a petition under
§ 2255. The court finds the magistrate judge gave
petitioner the proper level of consideration of his §
objection on this basis is overruled.
MAGISTRATE JUDGE ERRED BY DISCOUNTING THE CREDIBILITY OF THE
§ 2255 PETITION AS AN UNSWORN DOCUMENT AND BECAUSE THE
PETITION WAS NOT SUPPORTED BY DOCUMENTATION
R&R “note[d] that Mr. Picardi's § 2255
motion is signed by him, but not under penalty of perjury. .
. . Instead, he says the statements in the motion are true
‘to the best of his knowledge and belief.' ”
(Docket 28 at pp. 83-84) (referencing Docket 1 at p. 31).
Particularly addressing Picardi's claim of ineffective
assistance of counsel regarding plea offers, which will be
analyzed later in this order, the R&R observed
Picardi's declaration was “a far cry from
establishing the truth of the allegations concerning the plea
offers. . . . It is curious to the court that Mr. Picardi
provides none of these supporting documents to prove his
claim.” Id. at p. 84.
objects to the magistrate judge's statement that the
petition was signed by him, but not notarized. (Docket 34 at
p. 3). He claims “[t]he magistrate notes this in such a
way to cast doubt on the credibility of Dr. Picardi's
allegations, particularly in regard to his ineffective
assistance of counsel claims relating to the plea bargaining
process. . . . The magistrate does not, in its discussion of
this matter, point to any claims made by Dr. Picardi that are
demonstrably false or where the absence of a notary signature
would have changed the court's analysis.”
Id. (referencing Docket 28 at pp. 83-84). He asserts
“[t]o the extent the failure to notarize the Motion to
Vacate is treated as an error by the district court, it
should be treated as an error by habeas counsel, not
Petitioner himself.” Id. at p. 4.
contends he “did not err in failing to attach more
documentation to his Motion to Vacate.” Id. at
p. 5. He submits “[t]he magistrate insinuates that Dr.
Picardi fabricated the claim that he was offered a
misdemeanor cooperation deal.” Id.
(referencing Docket 28 at 83-84). Petitioner argues
“[t]he magistrate appears to be taking the position
that it is a movant's burden to support his § 2255
claims with documentary evidence. Further, the tone of the
magistrate's comments on the matter . . . suggests that
it will determine a claim is false and subject to dismissal
if documentary proof is not provided.” Id. at
p. 6 (referencing Docket 28 at p. 84). Petitioner argues
whether he “was permitted to attach anything to his
Motion to Vacate was only resolved conclusively by the
magistrate a few pages before . . . fault[ing] Picardi for
not attaching more.” Id. (referencing Docket
28 at pp. 24-25). Petitioner claims he “met his burden
. . . [and] provided a detailed recitation of facts
supporting his claims in regard to the issue of plea
negotiations, plea bargaining, and cooperation.”
Id. at p. 7.
submits the magistrate judge's demand “for
documentary proof is also unnecessary in light of the facts .
. . in this case . . . .” Id. Petitioner
refers to an October 27, 2011, motion hearing and an
affidavit by Attorney Culotta in the criminal case.
Id. at p. 8 (referencing Dockets 34-11 and CR.
Docket 130 ¶ 14). According to Picardi, substantiation
of his claim is bolstered by Attorney Van Norman's
affidavit in this habeas proceeding. Id.
(referencing Docket 11 at p. 11).
Picardi fails to acknowledge is that the magistrate judge
appeared to be perplexed by his failure to produce any
documentary evidence of a proffer agreement, plea discussions
between his attorneys and government counsel, or a proposed
plea agreement in response to the affidavits of Attorney
Culotta and Attorney Van Norman. See Dockets 11, 12,
25 and 28 at p. 84-86. While supporting documentation was not
necessary at the time the § 2255 Petition was filed, it
was appropriate to expect petitioner to file plea offer
documentation in response to the attorneys' affidavits
and the government's brief. The R&R addressed this
The court notes it is customary for the government to make
all plea offers in writing, including queen-for-a-day proffer
offers. Here, Ms. Culotta was in Indiana and the prosecutor
was in South Dakota, making it even more likely that any
offers made were reduced to writing. Furthermore, it is
highly likely that Ms. Culotta's responses to the
government and to Mr. Picardi, both of whom were in South
Dakota, would also likely have been written responses. It is
curious to the court that Mr. Picardi provides none of these
supporting documents to prove his claim. . . .
(Docket 28 at p. 84).
R&R points out, Picardi's § 2255 Petition
asserted Attorney Culotta advised the trial court there was
never a plea offer made to him. Id. The R&R
expresses the frustration of the magistrate judge:
Mr. Picardi does not enlighten this court as to which of the
many hearings in his case this statement was made or even the
date of the hearing. He also stated that in a previously
filed affidavit, Ms. Culotta stated the government had
offered Picardi a misdemeanor plea that Picardi declined.
Again, Mr. Picardi does not tell the court the date of the
affidavit or its location within the court's docket.
Id. The R&R specifically discusses Attorney
Culotta's August 8, 2012, affidavit. (Docket 28 at pp.
84-85) (referencing CR. Docket 130). After incorporating a
portion of Attorney Culotta's affidavit in the R&R,
the magistrate judge expressed a final frustration with
Picardi's presentation. “This court is unable to
verify that Ms. Culotta at some other time made a conflicting
statement to the trial court in a hearing because of the lack
of detail provided by Mr. Picardi.” Id. at p.
neither his § 2255 Petition nor his response to the
government's motion to dismiss did Picardi disclose to
the magistrate judge the date of Attorney Culotta's
affidavit or its location in the CM/ECF index. Id.
It was not until petitioner's objections to the R&R
that Picardi clarified his earlier references were to the
October 27, 2011, hearing and Attorney Culotta's August
8, 2012, affidavit. See Docket 34-11 and CR. Docket
130. Only as an exhibit to petitioner's objections to the
R&R did Picardi disclose the existence of a proffer
agreement proposed by Assistant United States Attorney Robert
Mandel. See Docket 34-1. The proffer agreement was
conveyed to Attorney Culotta on June 11, 2010, by Assistant
United States Attorney Anna Forbes of the United States
Attorney's Office in the District of West
Virginia. (Docket 34 at pp. 9-10) (referencing
Docket 34-2). The proffer agreement was not utilized by the
government and Picardi.
attached to Picardi's objections to the R&R addressed
discussions between AUSA Forbes and Attorney Culotta and her
discussions with Picardi regarding the proffer agreement and
plea negotiations. (Dockets 34-2 through 34-7 & 34-9).
These e-mails were not presented to the magistrate judge for
consideration in evaluating Picardi's § 2255
petition and the government's motion to dismiss.
Picardi was not required to attach documentary evidence in
support of his § 2255 petition, it is customary in the
District of South Dakota to permit petitioners to attach
documents to their petition and to provide the court with
specific references as to where significant evidence can be
located in response to the government's submission. The
R&R discusses the rules regarding the attachment of
exhibits in § 2255 proceedings. (Docket 28 at pp.
23-24). “The court believes Mr. Picardi's reading
of 2255 Rule 4(b) is correct: that rule contemplates that
exhibits may be submitted with a 2255 motion to explain the
movant's claims for relief and the court may consider
those exhibits in its initial review of the motion.”
Id. at p. 24 (emphasis omitted).
specifically argued for consideration of the Colvin Letter
and a United States Senate subcommittee report, Tax Haven
Abuses: The Enablers, The Tools and Secrecy,
which were attached to his initial § 2255 submission.
See Dockets 1-1 and 1-2 (some capitalization
omitted). It would have been beneficial to the analysis of
the § 2255 petition had Picardi provided to the
magistrate judge the documents attached to his objections.
The court finds the magistrate judge's comments do not
constitute error and do not impact the ultimate conclusion of
the R&R. Petitioner's second objection to the R&R
MAGISTRATE JUDGE ERRED BY CONFUSING THE IDENTITY OF THE
ENTITIES ENGAGED IN THE FINANCIAL TRANSACTIONS EVIDENCED AT
objects to the R&R on the basis the magistrate judge
erroneously “meld[ed] . . . entities and . . . this
mistake incorrectly led [the magistrate judge] to conclude
that there was overwhelming evidence of guilt established at
trial.” (Docket 34 at p. 24) (referencing Docket 28 at
p. 77). Picardi contends that “although the indictment
refers to E & S International, Limited, the magistrate
summarizes the charges as being based on Dr. Picardi routing
income through various entities, with the bulk of the funds
ending up in the ‘E & S Trust.'. . . This is
not the case and not supported by the record. The funds
remained in other entities; there is no evidence that they
were ever transferred to the E & S Trust.”
Id. (referencing Docket 28 at p. 3) (referencing CR.
argues “[w]hen identifying evidence of Dr.
Picardi's control over assets, the magistrate asserts
that: the E & S Trust was where deferred income was
deposited after being channeled through intermediate
entities; that a $1, 200, 000.00 line of credit was tied or
secured by the E & S Trust; that Picardi transferred
$200, 000.00 out of the E & S Trust and then deposited it
back into the trust; and, that Picardi had access to
information about the trust's investments.” (Docket
34 at pp. 24-25) (referencing Docket 28 at pp. 6-7, 13-14, 60
& 81). Petitioner submits “[t]hose assertions -
which the magistrate identifies as overwhelming evidence of
control . . . ― are not accurate. The government never
presented evidence that Picardi took loans, secured lines of
credit, or transferred money in and out of the E & S
Trust.” Id. at p. 25 (referencing Docket 28 at
pp. 70, 79, 83-84 & 94; further referencing by way of
example, CR. Docket 220 at p. 166) (discussing loan
arrangements between E & S International, Limited, and
Associated Enterprises, Ltd. (“AEL”)). He argues
“[w]hat the government did, in order to confuse and
deceive the jury, was talk about transfers of money and loans
and lines of credit in and out of AEL, the Royal Bank of
Scotland, and E & S International, Limited. Then, the
government talked about Dr. Picardi's control over the E
& S Trust. It did this so the jury would infer that these
were all one and the same, and that control over the trust
equated with control over the other entities.”
Id. at p. 26. Picardi contends “[t]his appears
to be the erroneous inference also drawn by the
magistrate.” Id. Picardi argues this was
“not a harmless mistake. It led the magistrate to
impute evidence of Dr. Picardi's control over the E &
S Trust to transactions involving E & S International,
Limited, and other organizations.” Id.
Special Agent Christopher Wright described the employment
contract between Picardi and Montrain Services, Limited,
(“Montrain”) of Dublin, Ireland. See CR.
Docket 222 at pp. 120:14-127:15 and Trial Exhibit 75. One
provision of the employment agreement was that Picardi could
not “encumber, commute, borrow against, dispose of, or
[as]sign the right to receive . . . payments” from any
funds received by Montrain. (CR. Docket 220 at p. 126:13-20)
(referencing Trial Exhibit 75, Appendix A ¶ 10(F)).
Wright explained that after funds were received by Montrain
the money passed through a number of foreign entities before
ending up in an account in E & S International, Ltd.
Id. at pp. 109:4-110:9. E & S International,
Ltd., was created on the Caribbean island of Nevis.
Id. at p. 110:8-11. E & S International Trust is
a separate company formed in New Zealand. Id. at p.
110:12-14. Picardi and his wife are the sole stockholders and
principal beneficiaries of E & S International Trust
which owns the stock of E & S International, Ltd.
Id. at p. 110:12-25; see also Trial Exhibit
224. Elfin Trust Company Limited was the trustee of E & S
International Trust. (CR. Docket 220 at p. 158:8-10; Trial
Exhibits 224 at p. 2 and 239 at pp. 4505 & 4511-12).
Wright testified that in June 1996, before funds began to
flow to Montrain, Picardi was asking Attorney Kritt about
gaining access to the money through E & S International
Trust. (CR. Docket 220 at pp. 130:11-132:9) (referencing
Trial Exhibit 62). In the letter Picardi confirmed receiving
$2, 500 from Morne' deVilliers to be delivered to the
trustee of E & S International Trust and used as the
initial corpus of the trust. (Trial Exhibit 62 at p. 1).
Picardi also expresses reservations to Attorney Kritt about
Picardi's relationship to the “IBC and no specifics
on how access is gained to the funds in the
IBC.” Id. at p. 2. In a June 11, 1996,
letter marked “CONFIDENTIAL ATTORNEY/CLIENT PRIVILEGED
COMMUNICATION” Attorney Kritt cautioned Picardi about
being directly involved in the creation of the trust:
I would not recommend that you use the statement that you
drew up. The reason a foreign grantor is used is to avoid the
Controlled Foreign Corporation rules. The only way that the
IRS can attack the Foreign Trust is to attack the legitimacy
of the grantor. If questioned, we will be required to
demonstrate that this trust was created by Morne's
independent act. It is crucial that there is a source
document that verifies that the trust was funded by
Morne'. Rightly or wrongly, the IRS would contend that
the note you drafted is self serving.
(Trial Exhibit 313 at p. 1) (capitalization in original). In
the end, Mr. deVilliers did not set up E & S
International Trust, but rather Picardi established the trust
through Shane Quinn, a friend in New Zealand. (CR. Docket 220
at pp. 132:12-134:13; Trial Exhibit 224).
June 11, 1996, letter Attorney Kritt advised Picardi:
Montrain will invest the money however you like (within
reason), including putting the funds in an IBC whose stock is
owned by the E & S International Trust. . . .
I caution you about referring to these funds as yours.
Because of tax laws, these funds are yours only when you are
entitled to withdraw them according to your employment
agreement with Montrain. You will be able to borrow these
funds prior to the withdrawal date contained in the
employment agreement if you so desire. . . .
The IBC's stock is owned by the E & S International
Trust. You, of course, are the primary beneficiary of the E
& S International Trust, you have the right to remove and
replace its trustees and the power to appoint the property of
the trust upon your death. Consequently, you have control of
the trust, and being in control of the trust, you have
control of any corporation in which the trust owns the
(Trial Exhibit 313 at p. 3) (parenthesis in original). Agent
Wright considered Attorney Kritt's explanation as
confirmation that Picardi controlled the corporation which
owned the accounts. (CR. Docket 220 at p. 160:14-16).
trust agreement between Elfin Trust Company and E & S
International Trust established on November 18, 1996,
specifically provided that “for so long as he is alive,
the named Beneficiary, Edward J. Picardi, is empowered to
remove, and replace any Trustee with or without cause at any
time in his sole and absolute discretion without the consent
of the Trustee or of any court of law or of any other person
or entity.” (Trial Exhibit 224, Article VI(C)(3)) (bold
omitted). In the event of Picardi's death, his wife
Sandra retained the same rights of removal and replacement of
the trustee. Id. The trust agreement authorized the
trustee to “enter into financial transactions with . .
. [and] may loan Trust assets to any Beneficiary, with or
without security and with or without interest, or at
below-market interest rates, for a period not to exceed the
term of the Trust.” Id. at Article V(B).
Wright explained that once Picardi's money found its way
into the account of E & S International it would create a
loan with AEL on the Isle of Man, which in turn set up a line
of credit for Picardi and Oak Ridge Ranch, LLC, which is
owned by Picardi. (CR. Docket 220 at pp. 112:16-113:6).
Picardi's line of credit was for $700, 000 and the line
of credit for Oak Ridge Ranch, LLC, was $500, 000.
Id. at p. 113:22-25. Picardi drew $250, 000 from his
line of credit and Oak Ridge Ranch, LLC, drew $150, 000 from
its line of credit. Id. at p. 114:14-21.
first of Picardi's draws on his line of credit occurred
before E & S International Trust was established.
Id. at pp. 163:23-164:9; see also Trial
Exhibits 95-98. The funds were directed into Picardi's
U.S. Bank account in Rapid City, South Dakota. (CR. Docket
220 at pp. 166:21-166:25 (referencing Trial Exhibits 98 &
99) and pp. 173:4-174:22 and 175:1-21) (referencing Trial
Exhibits 314 & 202). Picardi thanked Attorney Kritt for
expediting the line of credit and asked for confirmation that
any interest payments, after deducting AEL's fee, would
be placed in E & S International. (Trial Exhibit 100)
(Picardi's inquiry did not specifically reference E &
S International, Ltd., or E & S International Trust).
executed the certificate of organization of Oak Ridge Ranch,
LLC, on July 16, 2002. (Trial Exhibit 168). The draw on the
line of credit for Oak Ridge Ranch occurred on July 16, 2002,
but the paperwork for the transaction was not completed until
December 2007. (CR. Docket 220 at pp. 181:8-182:16 and
183:5-25) (referencing Trial Exhibits 217 & 251).
Wright confirmed that Picardi's interest payments went
back into E & S International, Ltd. Id. at p.
176:12-177:13 (referencing Trial Exhibit 256). Picardi took
an IRS mortgage interest deduction for these payments on his
tax returns. (CR. Docket 221 at p. 20:1-14). See
also Exhibits 6 (1998 tax return, Schedule A ¶ 11);
7 (1999 tax return, Schedule A ¶ 11); and 8 (2000 tax
return, Schedule A ¶ 11). Because Picardi was not paying
principal and interest payments on the loans, the year-end
loan balances in AEL's accounts were higher than at the
beginning of the year. (CR. Docket 221 at p. 45:13-46:9)
(referencing Trial Exhibit 161). AEL originally borrowed the
money from E & S International, Ltd., and then lent the
money back to it, so that as of December 31, 2002, E & S
International, Ltd., had $389, 036 in loans receivables on
its balance sheet. Id. at p. 50:21-25 (referencing
Trial Exhibit 245 at p. 6786). Of the $400, 000 in loans to
Picardi and Oak Ridge Ranch, LLC, as of December 31, 2002, he
had only paid back principal of approximately $11, 000.
Id. at p. 51:1-9. Agent Wright prepared a graph to
illustrate of the balances due to E & S International,
Ltd., from 1997 through 2007. (Trial Exhibit 316).
example of Picardi's control over the funds in E & S
International, Ltd., involved a plan to protect his property
in South Africa. In February 2000, Picardi wrote Attorney
Kritt advising him of the plan to liquidate Picardi's
hunting reserve, Onbedacht. (Trial Exhibit 147). In the event
no bidders showed up for the property auction, Picardi wanted
a representative at the auction. Id. If successful,
Picardi planned to take the property as a purchaser, as
opposed to remaining only the liquating owner whose money
would be subject to creditors' claims. Id. To
accomplish this plan, Picardi intended to take out a $150,
000 to $200, 000 loan from E & S International and have
the money wired to a Republic of South Africa bank account.
Id. On May 6, 2000, Picardi directed Charles
Freeman, one of the directors of E & S International,
Ltd., to transfer $200, 000 to set up his bid. (Trial Exhibit
148). In the same letter, Picardi stated to his bidder that
“E and S International Limited wants to purchase [the
real estate in the Province of the West Cape of South
Africa]” under specific terms and conditions.
Wright explained the money trail from E & S
International, Ltd., to a Royal Bank of Scotland account in
South Africa. (CR. Docket 221 at pp. 34:10-36:19 (referencing
Trial Exhibit 149). AEL was not used as an intermediary in
this transaction. Id. at p. 37:1-3. When the
purchase of the property fell through, Picardi's South
African agent deducted the fees and expenses incurred for
communicating with Picardi and traveling to the auction site.
(Trial Exhibit 149). The remaining funds were redeposited to
the Royal Bank of Scotland account of E & S
International, Ltd. Id. at p. 36:13-25 (referencing
Trial Exhibit 149).
the trial government counsel and Agent Wright used “E
& S” as a phrase for E & S International, Ltd.,
or E & S International Trust depending on the context of
the questions posed. See CR. Docket 222 at pp.
106:3-25; Id. at pp. 110:12-111:6; Id. at
pp. 171:14-172:19; Id. at p. 178:4-19 (referencing
Trial Exhibit 218); Id. at pp. 179:13-180:9
(referencing Trial Exhibit 223); 193:2-194:1 (referencing
Trial Exhibit 76); CR. Docket 221 at p. 20:11-13;
Id. at p. 26:14-25; Id. at p. 31:11-16;
Id. at pp. 32:23-33:4; Id. at p. 43:16-19
(referencing Trial Exhibit 151); Id. at p. 44:21-23;
Id. at p. 46:10-16; Id. at p. 47:10-23;
Id. at p. 48:9-12; Id. at p. 49:4-13;
Id. at pp. 50:23-51:4; CR. Docket 222 at p.
146:21-24; CR. Docket 223 at p. 110:9-12; Id., at p.
111:13-17; Id. at p. 113:5-7; Id. at p.
115:12-7 & 20-22; Id. at p. 116:12-16;
Id. at p. 118:3-10; CR. Docket 224 at pp.
137:22-138:2; Id. at p. 139:7-16; Id. at p.
140:11-21 (referencing Trial Exhibit 293); Id. at p.
141:6-8 (referencing Trial Exhibit 293); Id. at pp.
142:9-143:10; Id. at p. 146:6-13; CR. Docket 229 at
p. 113:14-25; Id. at p. 114:12-13; Id. at
counsel continued this phrasing with IRS Senior Revenue Agent
Marie Allen. (CR. Docket 224 at pp. 58:19-59:7 (referencing
Trial Exhibit 188); Id. at p. 60:12-18 (referencing
Trial Exhibit 188); Id. at p.71:1-22 (referencing
Trial Exhibit 69); Id. at pp. 72:12-73:14
(referencing Trial Exhibit 69); Id. at p. 126:11-13.
The government also used this phrasing in its
cross-examination of Mr. Brennan, Ms. Lecy and Picardi. (CR.
Docket 228 at p. 88:7-11; Id at p. 152:6-8; CR.
Docket 229 at p. 96:1-17; Id. at p. 97:8-11;
Id. at p. 109:18-19).
Culotta used E & S Trust as a reference to E & S
International Trust. See CR. Docket 223 at p.
3:17-19 (referencing Trial Exhibit 224). She used E & S
as a reference to E & S International, Ltd. (CR. Docket
222 at p. 156:17-19 (referencing Trial Exhibit 218); CR.
Docket 224 at p.71:1-22 (referencing Trial Exhibit 69);
Id. at pp. 72:12-73:14 (referencing Trial Exhibit
69); CR. Docket 228 at p. 59:15-20; Docket 228 at pp.
74:24-75:4; Id. at p. 77:14-16. Defense witness John
Brennan used E & S as a reference to E & S
International, Ltd. (CR. Docket 228 at p. 74:1-9:
Id. at p. 102:5-8). Picardi used E & S Trust as
a reference to E & S International Trust. (CR. Docket 221
at p. 43:16-19) (referencing Trial Exhibit 151); CR. Docket
222 at p. 150:8-15 (referencing Trial Exhibit 613); CR.
Docket 224 at p. 59:4-7 (referencing Trial Exhibit 188).
the more detailed summary of the trial evidence described
above, it is somewhat confusing that the magistrate judge
used an even more general designation of E & S Trust to
explain the trail of Picardi's money. It is clear from
the overall content of the R&R that the magistrate judge
grasped the relationship between E & S International,
Ltd., E & S International Trust and Picardi.
objects to the statement of the magistrate judge “that
‘Picardi testified he knew the money funding his loans
would come from the E & S trust and, when he repaid the
loans, all but 1% of the repayments would go back into E
& S.' ” (Docket 34 at p. 28) (referencing
Docket 28 at pp. 96-97). In response to government
counsel's question about money coming back to the E &
S [International, Ltd.] accounts, Picardi's testimony was
vague: “[i]t was my understanding that there was funds
from the pension would be placed in escrow into a pool by
this company [AEL] . . . and that loans would be available
through the agreements that were made . . . . At the seminar
they explained the loan interest, some of it, would go back
into the International Business Corporation [E & S
International, Ltd.].” (CR. Docket 229 at p. 96:1-14).
Picardi denied owning E & S International, Ltd.
“[T]hat's not mine, it's the business-it's
the international corporation that they set up. . . . they
set up the business corporation; I only found it afterwards
because they used the same letters I did in my trust.”
Id. at p. 96:16-22. Picardi claimed
“[i]t's always been a blur to me . . . .”
Id. at p. 96:24.
also objects to the magistrate judge's statement that
“Picardi ‘testified that wiring the money to
South Africa from the E & S Trust was Mr. Kritt's
plan.' ” (Docket 34 at p. 28) (referencing Docket
28 at p. 13). Picardi claims he did not say this as he
testified “the money used to facilitate the South
African transaction came from Elfin, an overseas bank.”
Id. (referencing CR. Docket 229 at pp. 51-52).
Picardi did testify the money would go through Elfin to the
South African bank account. Id. at p. 51:21-25. The
objection to the R&R is disingenuous as Elfin Trust
Company Limited was the trustee of E & S International
Trust. (Trial Exhibit 224). Picardi knew he and his wife were
the only shareholders in E & S International, Ltd., that
they were the primary beneficiaries of E & S
International Trust and that he ultimately controlled the
trust. (Trial Exhibit 313 at p. 3).
& S International Trust and E & S International,
Ltd., are not one and the same entity, they are closely-held
companies because Picardi and his wife owned all the stock in
both, they were the principal beneficiaries of the trust and
they were to receive all financial benefit derived from both
companies. The trial evidence proved Picardi had authority
over and exercised control of E & S International Trust
and E & S International, Ltd. Contrary to
petitioner's assertion, the government did not confuse or
deceive the jury. The overwhelming weight of the evidence
established beyond a reasonable doubt Picardi's guilt as
to all 13 counts of conviction.
clarity, the factual references in the R&R are modified
to be consistent with the factual summary above.
Petitioner's third objection to the R&R is overruled.
MAGISTRATE JUDGE ERRED BY FINDING PETITIONER'S CHALLENGE
TO THE TAX LAWS AS VOID FOR VAGUENESS WAS PROCEDURALLY
magistrate judge found Picardi did not raise the issue
“that the tax laws he was convicted under violated his
Due Process rights under the Fifth Amendment because they
were void for vagueness. Mr. Picardi did not raise this issue
before the district court, nor did he raise it on direct
appeal to the Eighth Circuit.” (Docket 28 at p. 26).
The magistrate judge found Picardi raised a “related
issue of whether the jury should have been instructed on the
void for vagueness theory, but that is different from
affirmatively arguing that a law is unconstitutional because
it is void for vagueness.” Id. Because he
failed to raise the constitutional challenge in the direct
appeal, the magistrate judge found “Picardi
procedurally defaulted this issue . . . .” Id.
contends “he did not procedurally default on this issue
because the issue was fairly presented to the district court
and Court of Appeals during the pendency of the criminal
case.” (Docket 34 at p. 31). He asserts that during
trial he “alleged that the tax laws at issue in his
case were vague.” Id. (referencing CR. Dockets
154 at p. 15 and 230 at p. 37). Petitioner claims “he
presented the issue through a proposed jury instruction,
which was rejected by the district court.” Id.
(referencing CR. Docket 230 at p. 37). Picardi submits his
argument is strengthened because he “appeal[ed] the
district court's denial of his [proposed]
instruction.” Id. at p. 32. Petitioner
acknowledges the United States Court of Appeals for the
Eighth Circuit “rejected this approach. . . . The Court
held that this matter should have been brought up as a legal
argument prior to trial, presumably in the form of a motion
to dismiss.” Id. at p. 33 (citing
Picardi, 739 F.3d at 1126).
argues “[a] claim has been fairly presented if the
operative facts and legal theories upon which a habeas claim
is based were previously presented to the underlying
courts.” Id. (referencing Tamapua v.
Shimoda, 796 F.2d 261, 262 (9th Cir. 1986); Peltier
v. Henman, 997 F.2d 461, 473 (8th Cir. 1993)).
Petitioner submits he “presented the operative facts
and legal theories on direct appeal by challenging the
district court's denial of his jury instruction. This was
the only preserved manner in which the substance of
Picardi's claim could be addressed. The substance of the
issue was presented to the Court of Appeals.”
citation to Peltier as authority for raising the
void-for-vagueness constitutional claim is misplaced.
Peltier dealt with a successive federal habeas
petition. “Insofar as Peltier's section 2255 motion
raises . . . four issues, it constituted an abuse of the
proceedings because Peltier could and should have raised
those issues in his first section 2255 proceeding. Thus,
under [McCleskey v. Zant, 499 U.S. 467 (1991)], his
failure to do so there justified the district court's
refusal to consider those issues in the present
proceeding.” Peltier, 997 F.2d at 473.
Peltier offers no guidance for analyzing a
procedural default claim of the nature presented in
Picardi's case. If anything, Peltier supports
the court's conclusion that Picardi's failure to
raise the void-for-vagueness claim is procedurally defaulted.
reliance on Tamapua suffers an even worse fate. The
decision was first abrogated on other grounds by Duncan
v. Henry, 513 U.S. 364 (1995) (per curiam), and
then abrogated by the United States Court of Appeals for the
Ninth Circuit in McMonagle v. Meyer, 802 F.3d 1093,
1098 (9th Cir. 2015).
magistrate judge analyzed the issue under the proper legal
standard. “Section 2255 movants are generally precluded
from asserting claims that they failed to raise on direct
appeal.” (Docket 28 at p. 26) (referencing United
States v. Frady, 456 U.S. 152, 167-68 (1982); McNeal
v. United States, 249 F.3d 747, 749 (8th Cir. 2001)).
“When a § 2255 petitioner asserts a claim that is
procedurally defaulted because it was not raised on direct
appeal, the claim can only proceed after the petitioner has
shown either: (1) actual innocence or (2) that the procedural
default should be excused because there was both cause for
the default and actual prejudice to the petitioner.”
Id. at p. 21 (referencing Bousley v. United
States, 523 U.S. 614, 621-22 (1998); McNeal,
249 F.3d at 749). “The requirement of cause . . . is
based on the principle that petitioner must conduct a
reasonable and diligent investigation aimed at including all
relevant claims and grounds for relief . . . .”
Id. at p. 27 (citing Cornman v. Armontrout,
959 F.2d 727, 729 (8th Cir. 1992)). “A demonstration of
the ‘cause' element of the cause and prejudice test
‘must be something external to the petitioner' that
‘impeded' the petitioner's efforts.”
Id. (citing Coleman v. Thompson, 501 U.S.
722, 753 (1991) (quoting Murray v. Carrier, 477 U.S.
478, 488 (1986)). The magistrate judge found Picardi did not
demonstrate the “cause” element, so
“prejudice need not be analyzed.” Id. at
the fair representation standard from a review of petitions
filed under 28 U.S.C. § 2254, courts are very particular
as to what a petitioner must have raised in the earlier
proceeding in order to preserve an issue for consideration in
a federal habeas proceeding. In order to present a federal
habeas petition “[i]t is not enough that all the facts
necessary to support the federal claim were before the state
courts . . . . In addition, the habeas petitioner must have
‘fairly presented' . . . the ‘substance'
of his federal habeas corpus claim.” Anderson v.
Harless, 459 U.S. 4, 6 (1982) (per curiam)
(internal citations omitted). Presenting a claim to the
district court that is merely similar to the federal habeas
claim is insufficient to meet the fairly presented
requirement. Duncan, 513 U.S. at 365-66 (“If
state courts are to be given the opportunity to correct
alleged violations of prisoners' federal rights, they
must surely be alerted to the fact that the prisoners are
asserting claims under the United States Constitution. If a
habeas petitioner wishes to claim that an evidentiary ruling
at a state court trial denied him the due process of law
guaranteed by the Fourteenth Amendment, he must say so, not
only in federal court, but in state court.”)
(referencing Harless, 459 U.S. 4). “Both
[Picard v. Connor, 404 U.S. 270 (1971)] and
Harless emphasized that mere similarity of claims is
insufficient to exhaust.” Id. at 366
(referencing Picard, 404 U.S. at 276;
Harless, 459 U.S. at 6). “[I]t is not enough
to make a general appeal to a constitutional guarantee as
broad as due process to present the ‘substance' of
such a claim to a state court.” Gray v.
Netherland, 518 U.S. 152, 163 (1996).
avoid a procedural default, the habeas petitioner must fairly
present his claim to the [lower] court, that is, he must
‘present the same facts and legal theories to the state
court that he later presents to the federal [habeas]
court.' ” Morris v. Norris, 83 F.3d 268,
270 (8th Cir. 1996) (citing Jones v. Jerrison, 20
F.3d 849, 854 (8th Cir. 1994)). “[H]abeas petitioners
must have explicitly cited to the United States Constitution
or federal case law in their direct appeal to preserve
federal [habeas] review.” Id. (citing
Luton v. Grandison, 44 F.3d 626, 628 (8th Cir.
1994); referencing Duncan, 513 U.S. 364).
this circuit, to satisfy the ‘fairly presented'
requirement, [a habeas petitioner is] required to
‘refer to a specific federal constitutional right, a
particular constitutional provision, a federal constitutional
case, or a . . . case raising a pertinent federal
constitutional issue' in the [lower] court.”
Abdullah v. Groose, 75 F.3d 408, 411-12 (8th Cir.
1996) (citing Ashker v. Leapley, 5 F.3d 1178, 1179
(8th Cir. 1993) (internal quotation and citation omitted).
“[P]resenting a claim to the [lower] court that is
merely similar to the federal habeas claim is insufficient to
satisfy the fairly presented requirement.” Id.
(referencing Duncan, 513 U.S. 364). “The legal
basis for a claim presented in [lower] court must be
‘the substantial equivalent' of that relied upon in
the federal petition.” Satter v. Class, 976
F.Supp. 879, 887 (D.S.D. 1997) (referencing Picard,
404 U.S. at 278; Schneider v. Delo, 85 F.3d 335, 339
(8th Cir. 1996)).
assertion that his proposed jury instruction number nine
fairly presented the issue now before the court on a
void-for-vagueness constitutional claim is misplaced. The
proposed instruction read in its entirety as follows:
OF UNSETTLED LAW
Where the tax law is vague or highly debatable, a defendant
lacks the requisite intent to violate it. Criminal
prosecution for the violation of an unclear duty itself
violates the clear constitutional duty of the government to
warn citizens whether particular conduct is legal or illegal.
A defendant cannot be guilty of willfully evading and
defeating income tax when the law surrounding the
deductibility of certain expenses is unsettled and there is
no direct authority pointing to a ready answer. The tax law
is “unsettled” where individuals could plausibly
reach directly opposing, reasonable and well-supported,
conclusions regarding the law's interpretation.
See CR. Dockets 154 at p. 15. Picardi's
presentation to the trial court during the settlement of
instructions conference made no mention of a constitutional
MR. VAN NORMAN: The only instruction that we would still ask
the Court to consider is our proposed jury instruction 9,
definition of unsettled law.
MR. VAN NORMAN: Your Honor, I think that part of what we have
done this morning exemplifies that, and I think it helps the
jury to understand that there is a huge deal of confusion and
difficulty with common citizens dealing with the tax code,
including CPAs and attorneys who hold themselves out as
experts. That's the basis for our request.
THE COURT: I did look at this instruction; we studied it.
It's not a pattern instruction, but it's drawn from
case law. As long as it's drawn from cases that defense
counsel cited, there's not in any of those cases that I
could see an approved instruction. I understand the source
and I ...