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United States v. Gorski

United States District Court, D. Massachusetts

August 1, 2014

UNITED STATES of AMERICA
v.
DAVID E. GORSKI, Defendant

Page 257

For David E. Gorski, Defendant: Tracy A. Miner, LEAD ATTORNEY, Demeo LLP, Boston, MA; Eoin P. Beirne, Jennifer J. Mather, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, PC, Boston, MA.

For USA, Plaintiff: William F. Bloomer, LEAD ATTORNEY, Alexander H. Berlin, United States Attorney's Office, Boston, MA.

Page 258

MEMORANDUM AND ORDER ON MOTION FOR LEAVE TO FILE AND MOTION FOR RECONSIDERATION

F. Dennis Saylor IV, United States District Judge.

This is a criminal prosecution arising out of allegedly false representations concerning

Page 259

a corporation's eligibility to obtain contracts as a service-disabled veteran-owned small business (" SDVOSB" ). Defendant David Gorski is charged with one count of conspiracy to defraud the United States in violation of 18 U.S.C. § 371 and four counts of wire fraud in violation of 18 U.S.C. § 1343. The government contends that Gorski, who operated a company called Legion Construction, Inc., misrepresented that Legion was a SDVOSB in order to qualify for and obtain government contracts.

On June 19, 2013, the government moved to disqualify attorney Tracy Miner, counsel for defendant. It contended that attorney Miner has an actual or serious potential conflict of interest because attorneys from her firm, Mintz, Levin, Cohen, Ferris, Glovsky, and Popeo, PC (" Mintz Levin" ), participated in certain of the underlying events and could be witnesses in the trial of this case. On January 2, 2014, Magistrate Judge Jennifer Boal denied the government's motion.

The government has filed a motion for reconsideration of the Magistrate Judge's decision, contending that it was clearly erroneous and contrary to law. For the following reasons, the motion will be denied without prejudice, subject to the execution of a more comprehensive waiver of potential conflicts by the defendant.

I. Background

The facts are set forth in detail in the Magistrate Judge's order. A brief summary is outlined below.

A. Regulatory Scheme

Pursuant to 15 U.S.C. § 644(g)(1)(A)(ii), at least three percent of all government contract awards must go to businesses that are owned by service-disabled veterans.[1] Regulations promulgated by the United States Department of Veterans Affairs (" VA" ) and the Small Business Association govern SDVOSB eligibility. To qualify as a SDVOSB under those regulations, an entity must be at least 51 percent owned by one or more service-disabled veterans. 38 C.F.R. § 74.3; 13 C.F.R. § 125.9. The entity must also be controlled by one or more service-disabled veterans. 38 C.F.R. § 74.4(c)(1); 13 C.F.R. § 125.10(a). " Control by one or more service-disabled veterans means that both the long-term decision[] making and the day-to-day management and administration of the business operations must be conducted by one or more service-disabled veterans . . . ." 13 C.F.R. § 125.10(a); see also 38 C.F.R. § 74.4(a) (" Control means both the day-to-day management and long-term decision-making authority for the [entity]." ).

Effective February 8, 2010, the VA regulations were amended to require that an eligible owner " work full-time in the business," replacing the previous requirement that " [o]wners need not work full time but must show sustained and significant time invested in the business." Compare 38 C.F.R. § 74.4(c)(1) (2010) with 38 C.F.R. § 74.4(c)(1) (2008).

B. Legion Construction, Inc.

Legion Construction, Inc., is a corporation based in Chelmsford, Massachusetts, that performs construction work. According to the indictment, David E. Gorski is nominally a minority owner and vice president of Legion. He is not a veteran.

In late 2005 or early 2006, Gorski allegedly recruited Joseph Steen, a veteran, to

Page 260

be the nominal 55 percent owner, founder, and president of Legion. In April 2006, Gorski certified to the government that Legion was a SDVOSB.[2] Legion was subsequently awarded government contracts from the VA, the General Services Administration, the Army, and the Navy.

On August 20, 2007, Legion underwent a corporate restructuring. As part of the restructuring, Steen reduced his ownership to 11 percent and Gorski became a 49 percent owner. Peter Ianuzzi, also a veteran, became the owner of the remaining 40 percent. After the restructuring, Legion continued to bid on and receive construction contracts from the VA.

On January 11, 2010, Legion submitted a bid on a VA construction contract for the agency's medical center in White River Junction, Vermont. Legion was awarded the contract. On March 8, 2010, one of Legion's competitors, Ironclad Services, Inc., filed a bid protest with the SBA challenging Legion's status as a SDVOSB. Ironclad alleged that Legion was improperly awarded the White River Junction contract because it was controlled by Gorski and not by one or more service-disabled veterans.

Mintz Levin represented Legion in connection with the bid protest.[3] Samuel M. Starr, a partner at Mintz Levin, was the principal attorney handling that representation.

On April 5, 2010, Legion submitted a response to the SBA. The response contained a set of documents that showed that as of January 11, 2010, Steen and Ianuzzi owned 51 percent of Legion stock. ( See Docket No. 41, Ex. D).

The response also stated that Legion had undergone a corporate restructuring while the bid for the contested VA contract was pending. It stated that Ianuzzi purchased Steen's share of Legion's stock on February 1, 2010. As proof, Legion submitted an affidavit from Ianuzzi stating, among other things: " On February 1, 2010, I purchased Joseph Steen's 11% of Legion's common stock and now I own 51% of Legion." (Docket No. 37-2, at 28). According to defendant, Legion's stock ledger, the stock purchase agreement, and Legion's stockholder agreement confirm that the transaction occurred on February 1, 2010.

Mintz Levin handled the corporate restructuring. It also drafted, or had a significant role in drafting, the Ianuzzi affidavit.

The government alleges that Legion's submission to the SBA contained material falsehoods about the restructuring. Specifically, it contends that Ianuzzi actually purchased Steen's stock in March 2010. The government further contends that Legion employed Mintz Levin to backdate the agreements to February 1, 2010. It contends Legion backdated the documents so that it could fraudulently claim that it was a SDVOSB under the new VA regulations that went into effect on February 8, 2010.

Gorski contends that the stock-transaction agreements had a legitimate effective date of February 1, 2010. He also claims that the practice of making agreements retroactive to ensure compliance with regulations is a common practice.

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According to Gorski, Ianuzzi is now the president and sole shareholder of Legion.

C. The Indictment

On October 23, 2012, a grand jury returned an indictment against Gorski, charging him with one count of conspiracy to defraud the United States in violation of 18 U.S.C. § 371 and four counts of wire fraud in violation of 18 U.S.C. § 1343. The indictment alleges that Gorski caused Legion and Ianuzzi to submit the allegedly false representations outlined above. Neither Legion nor Ianuzzi are defendants; Ianuzzi is an unindicted co-conspirator. Steen died in 2010.

D. Representation by Mintz Levin

At some point, attorney Tracy Miner of Mintz Levin began to represent Gorski in connection with the criminal proceedings. She is lead counsel in this case, which is set to begin trial on September 29, 2014. She has not represented Legion, as opposed to Gorski, in the criminal matter. Miner contends that she had no role in the events of 2010 that are the subject of the indictment.

Until today (August 1, 2014), Miner was a partner at Mintz Levin. She is now at a smaller firm, Demeo LLP.

Gorski is also represented by Eoin Beirne of Mintz Levin. Beirne is a non-equity partner at Mintz Levin. There is no dispute that Miner is lead counsel for Gorski in the defense of this matter.

E. The Motion to Disqualify

On June 19, 2013, the government filed a motion to disqualify attorney Miner as counsel in this proceeding. The government contended that attorney Miner should be disqualified because attorneys from Mintz Levin could serve as witnesses if (1) defendant asserted the defense of advice of counsel or (2) they were compelled to testify about their representation of Legion, assuming that the crime-fraud exception to the attorney-client privilege applied.

On July 16, in opposing the government's motion, defendant filed a written waiver of any actual or potential conflict of interest. He represented that he did so after consulting with attorney Tom Kiley, who was independent counsel hired for that purpose. The waiver was written as a letter to Gorski from attorney Miner, countersigned by Gorski. It stated in relevant part:

The Massachusetts Rules of Professional Conduct require that a lawyer may not represent a client if the representation of that client may be materially limited by the lawyer's own interests unless the lawyer believes that the representation will not be adversely affected and the client consents after consultation. (Rule 1.7(b)). I do not believe that our representation will be adversely affected by the Government's allegations as I do not believe that either Legion or Mintz Levin committed any criminal act in connection with the transactions involving our representation. To the extent that the Government has made such allegations against Legion and Mintz Levin, our interest in disproving them is the same.
By your signature below on this letter, you acknowledge that you want me and Mintz Levin to represent you and consent to my and this firm's representation of you despite the theoretical potential for conflict. You expressly waive the right to bring a claim for ineffective assistance based on that potential conflict. That waiver is to be narrowly construed and does not limit your right to bring a claim of ineffective assistance on any other applicable basis.

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You are encouraged to consult with independent counsel before signing this waiver so that you are fully aware of the consequences of executing the waiver. Also, please don't hesitate to contact me with any questions or concerns before signing.

(Docket No. 41, Ex. G at 1).

The Magistrate Judge held hearings on the motion on August 12, October 15, and December 5, 2013.[4] At the hearing, defendant unequivocally acknowledged the risks of any potential conflicts with attorney Miner or Mintz Levin and waived those conflicts. The Magistrate Judge first explained to defendant that he had a Sixth Amendment right to counsel and to representation that was free from conflict. ( Foster Hearing Tr., Docket No. 102 at 6:2-7). She also explained that his lawyer's advocacy may be compromised even where there is a waiver of the conflict, and that the Court has an independent interest in ensuring that criminal trials were conducted within the ethical standards of the legal profession. ( Id. at 6:10-17). She then explained the potential conflicts under the advice-of-counsel defense and the crime-fraud exception to the attorney-client privilege. ( Id. at 7:7-9:8).

The Magistrate Judge then took defendant's waiver:

Q: All right. Mr. Gorski, do you understand that Ms. Miner may have a conflict with regard to representing you as a result of her firm's prior ...

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