United States v. Hild

644 F.Supp.3d 7

UNITED STATES of America, v. Michael HILD, Defendant.

No. 19-CR-602 (RA)

United States District Court, S.D. New York

Signed December 7, 2022

Jordan Lancaster Estes, Scott Andrew Hartman, Assistant U.S. Attorneys, United States Attorney's Office, New York, NY, for United States of America.

Alexander Levine, Brian A. Jacobs, Morvillo, Abramowitz, Grand, Iason, & Anello P.C., New York, NY, Ben Dusing, The Law Offices of Benjamin G. Dusing, PLLC, Fort Wright, KY, Brandy Katy Lawrence, Warsaw, KY, for Defendant.

OPINION & ORDER

RONNIE ABRAMS, United States District Judge:

Following a fourteen-day jury trial, Defendant Michael Hild was convicted of committing securities fraud, wire fraud, and bank fraud, as well as conspiring to do so. The evidence established that Hild and his co-conspirators at Live Well Financial ("Live Well"), a company he founded and for which he operated as Chief Executive Officer, engaged in a multi-year scheme to fraudulently inflate the value of a portfolio of bonds used as collateral to secure cash loans. Although the loan amounts were nominally based on prices provided by a third party, the evidence demonstrated that Live Well had directly supplied valuations to that third party, unbeknownst to its lenders, basing them on its own internal pricing methodology rather than on what the bonds could readily be sold for in the market. As a result, Live Well was able to purchase the bonds at one price, provide the third party its own inflated valuations, and then use those inflated bond values as collateral to take out loans worth significantly more than the price for which the bonds could be sold. This arrangement resulted in a substantial cash windfall for Live Well, defeated the design of the loan agreements with the lenders, and left the loans critically undercollateralized.

After he was convicted, Hild filed motions for a judgment of acquittal, or, in the alternative, for a new trial. His motions advance arguments regarding sufficiency of the evidence, prejudicial error related to certain opinion testimony, and ineffective assistance of counsel under the standard governed by Strickland v. Washington, 466 U.S. 668, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984)—each involving issues by now familiar in this district.

Hild also raises a novel legal argument, however, which presents a challenging question at the intersection of the Sixth Amendment right to conflict-free counsel and the modern reality—all too familiar to those who work in the legal profession—that other obligations, personal and professional, inevitably arise, even when ensuring a fair trial for the accused. Namely, can a scheduling 'conflict,' in the colloquial sense, together with the preoccupation and workload that accompany it, rise to the level of an "actual conflict" under the framework of Cuyler v. Sullivan, 446 U.S. 335, 348, 100 S.Ct. 1708, 64 L.Ed.2d 333 (1980), and its progeny, requiring a limited "presumption of prejudice" upon a motion for a new trial? Or, in the alternative, should such a scheduling 'conflict' instead be viewed under the Strickland rule, requiring a defendant to demonstrate both that counsel's representation fell below a reasonable professional threshold, and that such error prejudiced the outcome?

Specifically, Hild claims that his trial counsel, Benjamin Dusing and Brandy Katy Lawrence, labored under an "actual conflict of interest" leading to a lapse in his representation because, at the time of his trial, they were involved in ongoing litigation in Kentucky related to the custody of Dusing's daughter. Hild argues that, because a hearing in the Kentucky litigation was scheduled on a date that could have overlapped with the end of his trial in New York, and because Dusing and Lawrence were "preoccupied" with this litigation, the Court should view his motion under Sullivan's more lenient framework, thereby warranting him a new trial.

Hild and Dusing have submitted declarations with competing narratives regarding whether, and the degree to which, the Kentucky litigation affected Hild's defense at trial. For the purposes of the present motion, however, the Court assumes each of Hild's such allegations to be true. And in light of some of the unusual and troubling circumstances present here, the Court does not take issue with Hild's characterization of this case as one distinguishable "from the run-of-the-mill case where a lawyer has multiple obligations." Oral Arg. Tr. 9. At the time of Hild's trial, Dusing was confronting the loss of custody over his daughter, stood accused of domestic abuse, and ultimately faced serious professional sanctions given his violent and erratic behavior. (Indeed, he was subsequently suspended from practicing law in two states.) Such circumstances may well have taken a psychological toll, and could understandably have left Dusing deeply concerned about events in Kentucky while at trial in New York. But in another sense, balancing multiple obligations and personal and professional priorities is the norm of the profession. Where the issue complained of is divided attention, rather than divided loyalties, Strickland stands ready to remedy any attorney's failure to effectively advocate for the accused at trial, regardless of why his representation "fell below an objective standard of reasonableness." Williams v. Taylor, 529 U.S. 362, 390-91, 120 S.Ct. 1495, 146 L.Ed.2d 389 (2000).

The Supreme Court has cautioned against "expansive application" of the rare "Sullivan exception" for an actual conflict, such that it would swallow the Strickland rule. Mickens v. Taylor, 535 U.S. 162, 175-76, 122 S.Ct. 1237, 152 L.Ed.2d 291 (2002). To grant Hild the remedy he seeks would do just that. The Court therefore concludes that, where an attorney with otherwise undivided loyalties "shirks his ethical obligation to dutifully represent his client" due to another obligation—be it a vacation, caring for an ailing loved one, attending a child's play, another client's trial, or a hearing such as Dusing's—"Strickland provides the appropriate analytic framework." United States v. O'Neil, 118 F.3d 65, 72 (2d Cir. 1997).

Once viewed through the well-established Strickland lens, the Court concludes that Dusing's representation of Hild at trial was not constitutionally deficient. To the contrary, over the course of a two-and-a-half-week trial, the Court observed Dusing's representation first-hand and found him to be a zealous and articulate advocate—at the very least on par with other white-collar litigators who regularly practice in this district. Dusing presented a clear defense theory that was similar in many respects to the theory set forth in Hild's post-trial briefing and he advanced that theory by way of robust cross-examination, and through the testimony of his client, which spanned multiple days. The Court is unconvinced that such representation fell outside the "wide range of reasonable professional assistance" so as to constitute Strickland error. 466 U.S. at 684, 104 S.Ct. 2052. Even assuming it did, Hild fails to demonstrate that, but for any alleged error, "the result of the proceeding would have been different." Id.

Accordingly, for the additional reasons that follow, Hild's motions are denied in their entirety.

BACKGROUND

Hild's Rule 29 motion relies on arguments regarding the sufficiency of the evidence presented at trial, whereas his Rule 33 motion largely relies on events occurring outside the trial record to establish purported ineffective assistance of counsel.

Accordingly, this opinion will proceed, first, by describing the facts established at trial, see infra at 18-24, and applying the operative standard for Hild's Rule 29 motion, see infra at 24-30; second, by describing the events giving rise to Hild's argument in his Rule 33 motion of ineffective assistance of counsel (due to an alleged "actual conflict" or otherwise), see infra at 31-34, and applying the law to those claims, see infra at 33-47; and, finally, by addressing Hild's arguments in the alternative for a new trial, see infra at 46-53.

I. Evidence Presented at Trial

A. Founding of Live Well and Reverse Mortgage Servicing

Live Well was established in 2005, and, at all relevant times, Hild was its CEO, Tr. 1247, 1867, and largest shareholder, Tr. 1904-05; see also GX321. Hild founded Live Well to pursue a business opportunity in the burgeoning reverse mortgage space. Tr. 1785-88. Reverse mortgages, or Home Equity Conversion Mortgages ("HECMs"), are a financial product designed to provide liquidity to senior homeowners whose net worth is primarily tied up in their home equity. Tr. 57-58, 578-79, 1788. HECMs permit individuals to receive monthly cash income by using their home equity as collateral. Tr. 579. For many years, Live Well operated as a traditional and reverse mortgage broker and servicer: it reviewed applications from borrowers, approved loans, and then serviced those loans. Tr. 946, 1790-91, 1814.

Beginning in approximately 2011, Live Well began securitizing reverse mortgages into bonds called HECM mortgage-backed securities ("HMBSs"). Tr. 947. After it began to sell these securities, it "[g]rew dramatically." Tr. 1806. Packaging the mortgages as bonds allowed Live Well to generate revenue more quickly by selling pools of similar reverse mortgages to investors in bulk, rather than one-by-one.

Tr. 947-49. Key among these bonds was a subcategory called HECM "interest only" ("HECM IO") bonds, which are made up of derivatives of HECMs that include only the interest portion of the loan rather than the entire reverse mortgage. Tr. 59, 60, 950-52; see also Tr. 1814. The HECM IO bonds are particularly attractive to investors because holders of those bonds receive regular interest payments. Tr. 1818.

B. Expansion Into Purchasing HMBSs & the Stifel Transaction

In 2014, Live Well expanded beyond securitization of reverse mortgages into the purchase of HMBSs. Tr. 58-59, 951-52, 1817. Hild stated that the...