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052770np-pdf•United States of America v. Steven Allen Schwartz
052770np-pdfCourt of Appeals for the Third CircuitMar 4, 2009
Honorable Marvin J. Garbis, Senior United States District Judge for the District*
of Maryland, sitting by designation.
NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
Nos. 05-2770 & 05-3767
_____________
UNITED STATES OF AMERICA
v.
STEVEN ALLEN SCHWARTZ,
Appellant
On Appeal From the United States District Court
for the Eastern District of Pennsylvania
(03-cr-00035-1)
District Judge: Honorable Stewart Dalzell
(04-cr-00231)
District Judge: Honorable Harvey Bartle, III, Chief Judge
Submitted Under Third Circuit LAR 34.1(a)
January 5, 2009
Before: CHAGARES and HARDIMAN, Circuit Judges, and GARBIS, District Judge*
(Filed: March 4, 2009)
_____________
OPINION OF THE COURT
_____________
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2
CHAGARES, Circuit Judge.
Steven Schwartz appeals his conviction and sentence in one matter and his
conviction alone in another. We will affirm each judgment.
I.
Because we write solely for the benefit of the parties, we will recite only the
essential facts.
A.
Between 1997 and 2002, Schwartz operated a Ponzi scheme, recruiting new
“investors” and using their “investments” to pay earlier investors and to fund his personal
expenses. Schwartz lied to clients about how their investments were doing, and he
harassed and bullied them when they dared to question his reports. But Schwartz could
not keep the scheme going with client funds alone. So, he turned to check-kiting.
Schwartz wrote and deposited worthless checks into bank accounts he controlled, and
then withdrew cash from those accounts before the bank could verify that the “money” in
them really did not exist.
In case number 05-3767 (District Court case number 03-35), a grand jury returned
a 27-count indictment charging Schwartz with various fraud offenses. Schwartz was
released on bail pending trial.
Prior to trial, Schwartz requested permission to represent himself, and the District
Court scheduled a hearing. But, the day before the hearing was to take place, the
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3
Government moved to revoke bail based upon newly discovered criminal conduct. The
District Court decided to use the scheduled hearing to address bail and postpone
discussion of Schwartz’s request to represent himself at trial. The District Court granted
the Government’s motion and revoked Schwartz’s bail.
A week later, the District Court held another hearing and granted Schwartz’s
request to represent himself at trial. It ordered then-trial counsel to remain in a stand-by
role. Following a lengthy trial, the jury convicted Schwartz of 16 of the 27 fraud counts.
The District Court imposed a sentence that included 225 months of imprisonment, five
years of supervised release, and over $1 million in restitution.
B.
The conduct that the District Court relied upon in revoking Schwartz’s bail in case
number 05-3767 gave rise to another fraud prosecution, case number 05-2770 (District
Court case number 04-231). In case number 05-2770, Schwartz was charged with nine
fraud counts. The evidence at that trial proved that Schwartz, as he did in case number
05-3767, deposited worthless checks into bank accounts and quickly withdrew cash from
those accounts before the bank could detect any wrongdoing. The jury convicted on all
counts. The District Court imposed a sentence that included 18 months of imprisonment
and five years of supervised release.
Schwartz then filed direct appeals (later consolidated), alleging that various
constitutional infirmities infected each matter.
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4
II.
In each matter, the District Court had jurisdiction pursuant to 18 U.S.C. § 3231.
In case number 05-3767, this Court has jurisdiction pursuant to 28 U.S.C. § 1291 and 18
U.S.C. § 3742(a). In case number 05-2770, this Court has jurisdiction pursuant to 28
U.S.C. § 1291.
III.
Schwartz argues that the District Court in case number 05-3767 (1) violated his
Sixth Amendment right to represent himself at trial, (2) violated his Sixth Amendment
right to confront witnesses against him, (3) improperly admitted evidence, and (4) failed
to consider the factors enumerated in 18 U.S.C. § 3553(a) when imposing sentence. We
disagree and will affirm the judgment of conviction and sentence in case number 05-
3767.
A.
Schwartz argues that the District Court violated his Sixth Amendment right to
represent himself when it refused to allow him to give direct testimony in narrative form
and instead ordered standby counsel to conduct the examination in the standard question-
and-answer format. Schwartz objected during trial, and the District Court overruled the
objection. This Court exercises plenary review of the District Court’s ruling. Cf. United
States v. Peppers, 302 F.3d 120, 127 (3d Cir. 2002) (holding that standard of review
applicable to claim of waiver of Sixth Amendment right of self-representation is plenary);
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5
United States v. Goldberg, 67 F.3d 1092, 1097 (3d Cir. 1995) (“Second, Goldberg claims
that the district court violated his Sixth Amendment right to the assistance of counsel
when, on the first day of testimony, it forced him to proceed pro se. We review de novo
Goldberg’s Sixth Amendment claim since it is tantamount to a claim of an ineffective
waiver of a constitutional right. Our review is plenary . . . .”) (internal citations omitted).
The Sixth Amendment gives a criminal defendant the right to represent himself at
trial, Faretta v. California, 422 U.S. 806, 834 (1975), but only to the extent that he is “able
and willing to abide by rules of procedure and courtroom protocol,” McKaskle v.
Wiggins, 465 U.S. 168, 173 (1984); see Martinez v. Court of Appeal of California, 528
U.S. 152, 162 (2000) (holding that right to self-representation must, at times, yield to “the
government’s interest in ensuring the integrity and efficiency of the trial . . . .” ). During
the Government’s case-in-chief, Schwartz demonstrated a high probability that he would
not be able to obey proper courtroom procedure. He repeatedly failed to refer to himself
in the third person. See, e.g., Government Supplemental Appendix (Gov’t Supp. App.)
452, 471, 492, 497. He argued with witnesses. See, e.g., Gov’t Supp. App. 967. And on
certain occasions, he attempted to testify in lieu of asking any question at all. See, e.g.,
Gov’t Supp. App. 821, 967-68. We hold that the District Court did not err in ordering
standby counsel to conduct Schwartz’s direct examination rather than to allow Schwartz
to testify in narrative form. See United States v. Mack, 362 F.3d 597, 601 (9th Cir. 2004)
(holding that when defendant “acts out” at trial, he “forfeits his right to represent himself
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Schwartz also argues that the District Court violated his right to self-1
representation when it excluded him from one sidebar conference. We disagree.
Exclusion from one sidebar conference does not automatically constitute a Sixth
Amendment violation. See United States v. Mills, 895 F.2d 897, 904-05 (2d Cir. 1990).
Rather, the exclusion must be viewed “in the context of the trial as a whole.” Id. at 905.
So viewed, it did not come close to destroying the jury’s perception that Schwartz was
handling his own case. Schwartz conducted voir dire, see, e.g., Gov’t Supp. App. 27-42,
delivered an opening statement, see Gov’t Supp. App. 186-95, conducted direct and re-
direct testimony of his own witnesses, see, e.g., Gov’t Supp. App. 1827-30, 1838-46,
1858-74, cross-examined the Government’s witnesses, see, e.g., Gov’t Supp. App. 295-
355, 451-501, made objections, see, e.g., Gov’t Supp. App. 517, and gave a closing
argument, see Gov’t Supp. App. 2346-84. Schwartz’s Sixth Amendment right to self-
representation was not violated.
6
in the proceeding”); United States v. Dougherty, 473 F.2d 1113, 1124 (D.C. Cir. 1972)
(holding that “[t]he right to self-representation, though asserted before trial, can be lost by
disruptive behavior during trial, constituting constructive waiver”), cited in Faretta, 422
U.S. at 834 n.46.1
B.
1.
Schwartz argues that the District Court violated the Confrontation Clause when it
allowed the Government to use affidavits — rather than live testimony — to authenticate
bank records covered by the hearsay exception for business records. Schwartz objected,
and the District Court overruled the objection. This Court will review the District Court’s
ruling de novo. United States v. Hendricks, 395 F.3d 173, 176-77 (3d Cir. 2005) (holding
that district court’s evidentiary ruling that “turned on its application of the Sixth
Amendment and its interpretation of the Supreme Court’s decision in Crawford [v.
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7
Washington, 541 U.S. 36 (2004)] . . . presents a question of law which we review de
novo.”).
The Confrontation Clause mandates that a “testimonial” statement made by a
declarant absent from trial is inadmissible unless the declarant is unavailable and the
defendant had an opportunity to cross-examine him. Crawford, 541 U.S. at 68. Business
records admitted pursuant to a hearsay exception, however, are not “testimonial” and
therefore do not implicate the Confrontation Clause. Id. at 56. Therefore, as the Court of
Appeals for the Seventh Circuit has noted, “it would be odd to hold that the foundational
evidence authenticating the records do[es].” United States v. Ellis, 460 F.3d 920, 927
(7th Cir. 2006). We agree and note that other courts of appeals that have confronted this
issue and the similar issue of authentication of public records are in accord. See, e.g.,
United States v. Adefehiniti, 510 F.3d 319, 328 (D.C. Cir. 2007) (involving
authentication of business records); United States v. Cervantes-Flores, 421 F.3d 825, 833
(9th Cir. 2005) (involving authentication of public records); United States v. Rueda-
Rivera, 396 F.3d 678, 680 (5th Cir. 2005) (same). The Government in its brief discusses
these cases, but Schwartz does not even mention them (much less demonstrate why we
should not follow them). Indeed, Schwartz cites no relevant precedent from any court of
appeals on this issue.
2.
Schwartz also argues that the Confrontation Clause was violated by the District
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8
Court’s rulings limiting testimony related to Schwartz’s harassment of his investment
clients. The District Court allowed the Government to introduce audiotapes of harassing
phone calls, Schwartz argues, but severely restricted Schwartz’s ability to put the calls in
their proper context. Schwartz objected at trial and the District Court overruled his
objections. We will review the District Court’s rulings for abuse of discretion. United
States v. Williams, 464 F.3d 443, 448 (3d Cir. 2006) (holding that standard of review
applicable to Confrontation Clause issue involving allegedly improper limitation on
witness testimony is abuse of discretion); United States v. Lore, 430 F.3d 190, 208 (3d
Cir. 2005) (same).
Schwartz cites two examples of the District Court’s allegedly improper rulings:
when the District Court sustained an objection to Schwartz’s direct testimony attempting
to explain why Schwartz told one victim she was a blackmailer, and when it sustained an
objection to his direct testimony attempting to explain why Schwartz told another victim
that the victim was “[the victim’s] own worst enemy.” Schwartz argues that each ruling
prevented him from placing these conversations in context. This argument fails because
Schwartz’s premise is factually incorrect.
True, the District Court sustained those two objections. But, in each instance, the
District Court subsequently allowed Schwartz to give other testimony effectively
explaining those calls. See Gov’t Supp. App. 1956, 2041-42 (explaining why he accused
victim of blackmail); 2022-27 (explaining why he said victim was “[victim’s] own worst
-- 8 of 18 --
Schwartz also argues that the District Court violated his Confrontation Clause2
rights by restricting his ability to cross-examine victims about the phone calls. He cites
one purported violation: the District Court sustained an objection made when Schwartz
asked a victim whether she recalled a particular phone call he placed to her concerning a
then-pending state court lawsuit.
If this was a violation, it was harmless. See United States v. Jimenez, 513 F.3d 62,
78 (3d Cir. 2008) (holding that harmless-error analysis applies to Confrontation Clause
violation). The Supreme Court has held that “the extent of cross examination otherwise
permitted” is one factor used to determine whether a Confrontation Clause violation is
harmless. Delaware v. Van Arsdall, 475 U.S. 673, 684 (1986). Here, that extent is
staggering. The District Court permitted Schwartz to cross-examine each of his 14
victims over the course of six days of trial. Indeed, the District Court allowed Schwartz
to question her about 10 years’ worth of events spanning a broad range of subjects. See
Gov’t Supp. App. 251-301. This voluminous amount of testimony, coupled with the
extensive documentary evidence presented by the Government, confirms that it was not
“highly probable” that the District Court’s refusal to allow Schwartz to question one
particular victim about one particular phone call “contribute[d] to the jury’s judgment of
conviction.” Jimenez, 513 F.3d at 78 (internal quotation marks omitted).
Schwartz makes this argument with respect to his conviction for a 2004 fraud,3
also. However, the District Court reconsidered its ruling admitting that conviction and
ultimately held that it must be excluded. There is, then, no need to review the District
Court’s initial Rule 404(b) ruling with respect to that conviction.
9
enemy”). That is, the District Court did not prevent Schwartz from putting the calls in
context.2
C.
1.
Schwartz argues that the District Court erred in admitting his conviction for bank
fraud committed in 1987 pursuant to Federal Rule of Evidence 404(b). Schwartz3
objected at trial, so we review for abuse of discretion. United States v. Butch, 256 F.3d
171, 175 (3d Cir. 2001).
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Rule 404(b) provides that extrinsic evidence of “other crimes, wrongs, or acts”
may not be offered to prove the defendant’s criminal propensity. But, such evidence may
be admitted if (1) it has a proper purpose, (2) it is relevant, (3) its probative value
outweighs its potential for unfair prejudicial effect, and (4) the court instructs the jury to
consider it only for its limited, proper purpose. United States v. Vega, 285 F.3d 256, 261
(3d Cir. 2002).
Schwartz contends that the prior conviction is pure propensity evidence and
therefore does not meet the first prong of the Rule 404(b) analysis. He argues that the age
of the conviction diminishes its relevance under the second prong. He further argues that
the evidence is more unfairly prejudicial than it is probative and thus does not meet the
third prong, either.
The District Court did not abuse its discretion in admitting the conviction pursuant
to Rule 404(b). As to the first prong, Schwartz does not appear to contest that the
conviction has a proper purpose, namely, demonstrating Schwartz’s knowledge that
depositing phony checks into an account and then immediately withdrawing cash from
that account is illegal. He merely argues that it also proves criminal propensity. This,
however, is not fatal to the first prong of the Rule 404(b) analysis. A prior conviction
will always tend to prove criminal propensity. The Rule 404(b) inquiry simply asks
whether the conviction has a proper purpose, not whether it has only a proper purpose.
See Vega, 285 F.3d at 261.
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11
As to the second prong, there is no expiration date beyond which prior acts are
inadmissible under Rule 404(b). We simply cannot say that the District Court abused its
discretion in finding the conviction relevant despite its 13-year-old (measured from the
date of the conduct underlying that conviction to the date of the conduct underlying the
charges in the present case) vintage. See, e.g., United States v. Williams, 308 F.3d 833,
837 (9th Cir. 2002) (holding that evidence of prior robbery that occurred 20 years before
conduct at issue admitted under Rule 404(b)); United States v. Hernandez-Guevara, 162
F.3d 863, 872-73 (5th Cir. 1998) (holding that conviction based upon conduct that
occurred 18 years before conduct at issue admitted under Rule 404(b)).
As to the third prong, Schwartz does not appear to specify precisely why he
believes the conviction is not as probative as it is unfairly prejudicial. In any event, the
District Court was well within its discretion in holding that a prior conviction resting
upon facts very similar to those underlying the instant charges (writing checks on
accounts with insufficient funds) was highly probative of Schwartz’s intent and did not
prejudice him unfairly.
2.
Schwartz also argues that the District Court erred in admitting evidence of
uncharged conduct, namely, false statements made to actual investors concerning profits
generated by their investments and harassing statements made to those investors if they
actually requested written proof. Again, Schwartz objected, so we review the District
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12
Court’s ruling for abuse of discretion. United States v. Brink, 39 F.3d 419, 425 (3d Cir.
1994).
The District Court held that these statements do not implicate Rule 404(b) because
they tended to prove the “manner and means” allegations set forth in the indictment. But
even if the statements did implicate Rule 404(b), the District Court’s ultimate conclusion
was correct because the statements would have been readily admissible under that Rule.
This evidence had the proper purpose of tending to prove Schwartz’s modus
operandi for his entire scheme: report falsely, then harass those who question the reports.
It was highly relevant and it was not unduly prejudicial. Rather, the evidence was very
duly prejudicial precisely because it so accurately typified Schwartz’s criminal
techniques. Finally, the District Court issued a careful limiting instruction similar to
those we have held cure any leftover unfair prejudice. See Gov’t Supp. App. 2432-33;
United States v. Givan, 320 F.3d 452, 461 & n.2 (3d Cir. 2003) (holding materially
similar limiting instruction sufficient to cure undue prejudice and satisfy Rule 404(b)).
D.
Lastly with respect to case number 05-3767, Schwartz argues that the District
Court failed to give “meaningful consideration’ to the factors enumerated in 18 U.S.C. §
3553(a) and then reasonably apply those factors in arriving at its ultimate sentence. We
review the District Court’s sentence for reasonableness, evaluating both its procedural
and substantive underpinnings using a deferential abuse-of-discretion standard. Gall v.
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13
United States, 128 S. Ct. 586, 594 (2007).
“Meaningful consideration” does not require jot-and-tittle recitation in a written
opinion of the sentencing court’s application of each § 3553(a) factor. It suffices that the
record as a whole shows that the District Court took the factors into account in fashioning
its sentence. United States v. Lessner, 498 F.3d 185, 203 (3d Cir. 2007) .
The District Court — by conducting a comprehensive sentencing hearing,
examining and largely adopting the Presentence Investigation Report (PSR), and issuing a
thoughtful written opinion — carefully and methodically considered all the factors set out
in § 3553(a) that applied to Schwartz’s crimes before imposing its sentence. For instance,
the District Court thoroughly considered the nature and circumstances of Schwartz’s
fraud, see, e.g., Defendant Appendix (Def’t App.) 229-41; PSR ¶¶ 7-15, 17-61, and
Schwartz’s personal history, see, e.g., PSR ¶¶ 96-114; Def’t App. 11. It considered
general and specific deterrence, the seriousness of Schwartz’s crimes, and the need to
protect the public from future such schemes. See, e.g., Def’t App. 999-1002, 1023-24. It
considered its sentencing options. See, e.g., PSR ¶¶ 121-34. It analyzed relevant
provisions of the Sentencing Guidelines and calculated Schwartz’s advisory range. See,
e.g., Def’t App. 911-57, 958-95 (offense level); 957-58 (criminal history category). It
heard argument on potential unwarranted sentencing disparities. See, e.g., Def’t App.
1007-08, 1021. And it heard argument on restitution. See, e.g., Def’t App. 1012-14. It
then reasonably balanced these factors in arriving at its sentence.
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The trial occurred after the Supreme Court issued Blakely v. Washington, 5424
U.S. 296 (2004) and before it issued United States v. Booker, 543 U.S. 220 (2005), and
therefore at a time where the proper scope of judicial fact-finding in conjunction with
sentencing was not entirely settled. In an abundance of caution, the District Court
decided to submit the issue of intended loss to the jury.
14
Accordingly, we will affirm the judgment of conviction and sentence in case
number 05-3767.
IV.
Schwartz argues that the convictions in case number 05-2770 should be vacated
because (1) the jury rendered inconsistent verdicts, (2) the Government failed to present
sufficient evidence to support conviction on any count, and (3) the Government
improperly used immunized testimony obtained at the bail hearing held during case
number 05-3767. We disagree and will affirm the judgment of conviction in case number
05-2770.
A.
Schwartz argues that his fraud convictions must be set aside because the jury’s
finding that he had the intent to defraud is inconsistent with its finding that he did not
intend to cause any loss. Schwartz made this argument in a post-trial motion for4
judgment of acquittal, and the District Court rejected it. We review the District Court’s
judgment de novo, using the same standard the District Court used: we will uphold the
verdict unless the jury convicted the defendant on multiple charges, and the guilty
verdicts on certain counts are logically inconsistent with the guilty verdicts on others.
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15
United States v. Gross, 961 F.2d 1097, 1007 (3d Cir. 1992).
Schwartz does not identify any inconsistencies among his various convictions.
Instead, he purports to identify an inconsistency between his convictions and the jury’s
failure to find a fact that would have increased his sentence. This situation is materially
identical to an inconsistency between a guilty verdict and an acquittal, which does not
merit setting the guilty verdict aside. Gross, 961 F.2d at 1007.
B.
Schwartz argues that the Government failed to present sufficient evidence that
Schwartz (and not someone else) perpetrated the fraudulent transactions at issue and, if he
did, that he did so with the intent to defraud. Schwartz made this argument in a post-
verdict motion for acquittal, and the District Court rejected it. We will review the District
Court’s decision de novo, using the same standard it used. That is, we will sustain the
verdict if, viewing the evidence in the light most favorable to the verdict-winner (here,
the Government), “any rational trier of fact could have found the essential elements of the
crime beyond a reasonable doubt.” United States v. Dent, 149 F.3d 180, 187 (3d Cir.
1998) (internal quotation marks omitted).
As to identity, the Government presented multiple witnesses from three separate
financial institutions who testified that the accounts into which phony checks were
deposited and from which cash was withdrawn immediately thereafter were registered to
Schwartz, or Schwartz and his mother jointly. As to intent, the Government presented
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16
Schwartz’s prior conviction for a factually similar fraud that put Schwartz on notice that
depositing worthless checks into bank accounts and then withdrawing cash from those
accounts before the bank has time to detect wrongdoing is unlawful. Taken in the light
most favorable to the Government, this evidence allowed a reasonable trier of fact to find
Schwartz guilty beyond a reasonable doubt.
C.
Schwartz argues that the Government violated the Fifth Amendment by using his
immunized testimony, given during the bail hearing, against him at trial. Schwartz made
this argument in his post-verdict motion for judgment of acquittal, and the District Court
rejected it. Because Schwartz did not object at trial, this Court reviews the District
Court’s ruling for plain error. See United States v. Small, 891 F.2d 53, 55-56 (3d Cir.
1989) (holding plain-error review applies to claim of trial error raised first in post-verdict
motion); United States v. Chaney, 446 F.2d 571, 576 (3d Cir. 1971) (holding plain-error
review applies to claim of violation of Fifth Amendment right against self-incrimination).
At the bail hearing in case number 05-3767, Schwartz testified under a grant of
immunity that prevented the Government from using that testimony or any fruits of that
testimony against Schwartz in a future prosecution. See United States v. Perry, 788 F.2d
100, 115 (3d Cir. 1986). Schwartz discussed two bank withdrawals. He testified that, at
the time he made one of those withdrawals, he understood that a loan he had been waiting
on had been approved and that the lender was in the process of depositing the proceeds
-- 16 of 18 --
Schwartz also argues that the Government impermissibly presented this5
information to the grand jury while seeking to obtain an indictment. Because it is not
clear when Schwartz first learned about what the Government presented to the grand jury,
it is not clear that the plain-error standard — the standard applied to errors of which the
defendant gains notice during trial yet to which the defendant fails to object during trial
— applies to this part of Schwartz’s Fifth Amendment claim. See Fed. R. Crim. P. 6(d)
(providing that defendant has no right to be present during grand-jury proceedings).
Nevertheless, any violation was harmless. See Szuchon v. Lehman, 273 F.3d 299,
319 (3d Cir. 2001) (holding that harmless-error review applies to claimed violation of
Fifth Amendment right against self-incrimination). Schwartz’s bail-hearing testimony
tended to exculpate him — not inculpate him — by suggesting that he lacked the intent to
defraud at the time he made the withdrawals. And that Schwartz’s mother did indeed sell
her home is not relevant to any of the elements of any of the fraud charges on which the
17
(an amount that would cover the withdrawal) directly into his bank account. He also
testified that, at the time he made the other withdrawal, he believed that the proceeds
from the sale of his mother’s house (again sufficient to cover the withdrawal) were being
deposited into his account. He contends that the Government improperly used this
information at trial in case number 05-2770 by calling a witness who testified that
Schwartz’s mother’s house had indeed been sold.
Even if this was an error, Schwartz has not carried his burden of persuasion in
demonstrating how it prejudiced him. See United States v. Olano, 507 U.S. 725, 734
(1993) (holding that in establishing plain error, unlike harmless error, “[i]t is the
defendant rather than the Government who bears the burden of persuasion with respect to
prejudice”). Though Schwartz states that the Government’s use of his immunized
testimony helped indict and convict him, nowhere in his brief does Schwartz explain how
it did so.5
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grand jury ultimately indicted him.
We have considered the arguments Schwartz raised in his pro se supplemental6
brief and find them to be meritless.
Insofar as counsel has been appointed under the Criminal Justice Act and because
the Court is of the opinion that there are no issues present in this appeal which warrant the
filing of a petition for writ of certiorari, counsel may file a motion to withdraw. See
Third Circuit LAR Misc. 109.2(c).
18
Accordingly, we will affirm the judgment of conviction in case number 05-2770.
V.
For the above reasons, we will affirm the District Court’s judgments in case
number 05-3767 and case number 05-2770.6
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