United States v. Rechnitz ( 2023 )

20-1011
United States of America v. Rechnitz
In the
United States Court of Appeals
For the Second Circuit
August Term, 2022
No. 20-1011-cr
UNITED STATES OF AMERICA,
Appellee,
v.
JONA RECHNITZ,
Defendant-Appellant.
On Appeal from a Judgment of the United States District Court for
the Southern District of New York.
ARGUED: JUNE 2, 2023
DECIDED: JULY 26, 2023
Before: NARDINI, PÉREZ, AND KAHN, Circuit Judges.
Defendant-Appellant Jona Rechnitz pleaded guilty in the
United States District Court for the Southern District of New York to
conspiracy to commit honest services wire fraud in violation of 18
U.S.C. § 1349. Among other things, Rechnitz’s underlying criminal
conduct included facilitating a bribe that resulted in the Correction
Officers’ Benevolent Association (“COBA”), a New York correctional
officers’ union, investing $20 million with Platinum Partners
(“Platinum”), a hedge fund that ultimately declared bankruptcy amid
government investigations into fraud.
Following his guilty plea, Rechnitz’s case was reassigned to
another district judge (Alvin K. Hellerstein, J.) for sentencing. After
his sentencing hearing but prior to his final restitution determination,
Rechnitz moved to have his case reassigned to another district judge.
His motion was premised on the recently discovered personal
relationship between the district judge in his case and Andrew
Kaplan, a defendant and cooperating witness in the ongoing
prosecutions against those involved in the Platinum fraud. The
district court denied that motion and ordered Rechnitz to pay
restitution to COBA for all of its remaining losses.
On appeal, Rechnitz argues that his case should have been
reassigned pursuant to 28 U.S.C. § 455(a) or (b) for resentencing or, in
the alternative, that the district court erred in imposing restitution for
all of COBA’s losses. We hold that the district judge erred in not
recusing himself under § 455(a). The judge not only had a close, near-
paternal relationship with Kaplan, but he also advised Kaplan on how
to proceed in his pending criminal case arising from the Platinum
fraud. The judge’s relationship with Kaplan was sufficiently close,
and Kaplan’s case was sufficiently related to Rechnitz’s case, that a
reasonable person would have questioned the district court’s
impartiality. Finally, we note that the district court initiated an ex
parte, off-the-record phone call with the United States Attorney’s
Office regarding Rechnitz’s restitution payments while this appeal
was pending. Such communications are disfavored, and the
communication here was particularly ill-advised under the
circumstances. Accordingly, we REMAND the case for reassignment
to a different district judge and for plenary resentencing.
2
DAVID ABRAMOWICZ, Assistant United
States Attorney (Lara Pomerantz, Assistant
United States Attorney, on the brief), for
Damian Williams, United States Attorney
for the Southern District of New York, New
York, NY, for Appellee.
NOAM BIALE (Michael Tremonte and Maya
Brodziak, on the brief), Sher Tremonte LLP,
New York, NY, for Defendant-Appellant.
PER CURIAM:
Defendant-Appellant Jona Rechnitz pleaded guilty pursuant to
a cooperation agreement in the United States District Court for the
Southern District of New York to conspiracy to commit honest
services wire fraud in violation of 18 U.S.C. § 1349. Among other
things, Rechnitz’s underlying criminal conduct included facilitating a
bribe paid by Murray Huberfeld, the co-founder of the hedge fund
Platinum Partners (“Platinum”), to Norman Seabrook, the president
of the Correction Officer’s Benevolent Association (“COBA”), the
largest correctional officers’ union in New York City. In return for the
3
bribe, Seabrook invested $20 million of COBA funds with Platinum.
When Platinum later declared bankruptcy amid government
investigations into fraud and other wrongdoing at the fund, COBA
lost $19 million of that investment.
After Rechnitz’s guilty plea, but before his sentencing, his case
was reassigned to another district judge (Alvin K. Hellerstein, J.). The
district court sentenced Rechnitz to five months of imprisonment,
followed by three years of supervised release. The district court
ultimately ordered Rechnitz to pay $12.01 million in restitution to
COBA, its remaining unrecovered losses from Platinum’s collapse.
After his initial sentencing, but before the final determination
on restitution, Rechnitz moved to have his case reassigned to another
district judge. His motion was premised on a recently discovered
personal relationship between the sentencing judge and Andrew
Kaplan, a defendant and cooperating witness in the ongoing
prosecutions of those involved in the Platinum fraud. Despite
4
granting a parallel motion for recusal by Rechnitz’s co-conspirator
Huberfeld, the judge denied Rechnitz’s motion and proceeded to
adjudicate the restitution order.
On appeal, Rechnitz argues that his case should be reassigned
for resentencing pursuant to 28 U.S.C. § 455(a) or (b), or, in the
alternative, that the restitution order should be vacated because it
erroneously covers all of COBA’s losses. We hold that the district
judge erred in not recusing himself under § 455(a). Not only did the
district judge have a close, near-paternal relationship with Kaplan, he
also advised Kaplan on how to proceed in his pending criminal case
arising from the Platinum fraud. The judge’s relationship with
Kaplan was sufficiently close, and Kaplan’s case was sufficiently
related to Rechnitz’s case, that a reasonable person would have
questioned the district court’s impartiality. Finally, we note that the
district court initiated an ex parte, off-the-record phone call with the
United States Attorney’s Office regarding Rechnitz’s restitution
5
payment while this appeal was pending. Such communications are
disfavored, and the communication here was particularly ill-advised
under the circumstances. Accordingly, we REMAND the case for
reassignment to a different district judge and for plenary
resentencing.
I. Background
A. The offense conduct
On June 8, 2016, Rechnitz pleaded guilty pursuant to a
cooperation agreement to a single-count information charging him
with conspiring to commit honest services wire fraud in violation of
18 U.S.C. § 1349. That charge arose out of Rechnitz’s participation in
two distinct bribery schemes.
The first scheme involved the bribery of numerous public
officials in exchange for beneficial official acts from 2008 through
2015. Rechnitz and a co-conspirator, Jeremy Reichberg, gave
numerous gifts to New York Police Department officials, including
travel, home renovations, sports tickets, expensive meals, and access
6
to prostitutes. In return, Rechnitz and Reichberg received benefits
from the people they bribed, including rides in NYPD vehicles for
themselves and their associates, the promotion or transfer of NYPD
officers with whom they sought to curry favor, pistol permits for
themselves and others, and a police escort of a car carrying Rechnitz’s
boss through the Lincoln Tunnel, including a partial lane closure.
Rechnitz and Reichberg also received benefits from elected officials in
the New York City and Westchester County governments in
exchange for contributions to campaigns and to pet political projects.
These benefits included favorable treatment from the New York City
Department of Buildings and the title of Westchester County
Chaplain for Rechnitz and Reichberg.
In the second bribery scheme, Rechnitz orchestrated a
conspiracy that involved bribing Norman Seabrook, the president of
COBA. In late 2013, Murray Huberfeld, the founder and co-owner of
the hedge fund Platinum Partners, asked Rechnitz for help attracting
7
institutional investors to the fund. That December, Rechnitz took
Seabrook and others on a trip to the Dominican Republic, during
which Rechnitz told Seabrook that he could personally make money
if he invested COBA’s funds with Platinum. Seabrook agreed to the
scheme, and Rechnitz and Huberfeld promised to pay him a
percentage of Platinum’s profits from the COBA investment; the pair
estimated that Seabrook’s take would exceed $100,000 annually.
In 2014, Seabrook arranged three separate investments in
Platinum by COBA, totaling $20 million. He then sought his kickback
payment from Rechnitz, who, acting on Huberfeld’s instructions,
gave Seabrook a Ferragamo handbag containing $60,000 in cash on
December 11, 2014. That same day, Rechnitz’s assistant prepared a
fraudulent $60,000 invoice to Platinum for tickets to the New York
Knicks, which Rechnitz then forwarded by email to Huberfeld, who
had promised to reimburse him for the payment to Seabrook. Three
days later, Platinum cut a check to Rechnitz for $60,000.
8
Some two years later, Platinum collapsed amid investigations
by the Securities Exchange Commission and the U.S. Department of
Justice. Executives at Platinum were charged with overvaluing assets
and concealing cashflow problems, and separately with an attempt to
defraud third-party bondholders of an oil company in which
Platinum had invested. COBA lost $19 million of the $20 million that
it invested with Platinum. There is no evidence that Rechnitz was
aware of Platinum’s issues at the time of the COBA investments, nor
that he was compensated for his role in arranging the Seabrook bribe.
B. Seabrook and Huberfeld’s prosecutions
In May 2016, Rechnitz began cooperating with the government
in its investigation of the bribery schemes with which he was
involved. On June 8, 2016, Rechnitz pleaded guilty pursuant to a
cooperation and plea agreement, in which the government agreed to
file a motion for a downward departure under Section 5K1.1 of the
United States Sentencing Guidelines if it determined that Rechnitz
9
had provided substantial assistance to investigators and complied
with his obligations under the agreement.
Seabrook and Huberfeld were successfully prosecuted for their
roles in the bribery conspiracy. At first, they were tried together in a
joint trial (at which Rechnitz testified) before Judge Andrew Carter,
but on November 16, 2017, the court declared a mistrial. The case was
then re-assigned to Judge Hellerstein.
On July 16, 2018, in Seabrook’s case, the government filed a
letter with the district court flagging two personal relationships of the
newly assigned district judge that might have potential relevance to
Seabrook’s case. Those relationships—with Gilad Kalter, the former
Chief Operating Officer of Platinum, and with Laura Berkowitz, the
wife of Huberfeld—were both so attenuated that neither the
government nor Seabrook believed they required recusal. Even so,
the government and Seabrook’s counsel agreed that the court needed
to decide the recusal issue itself.
10
On July 17, 2018, the district judge held a pre-trial hearing
during which he further explained these relationships. The judge
explained on the record that each relationship was very indirect and
agreed with Seabrook and the government that neither required
recusal. Then, the court announced that it would discuss another
relationship with Seabrook and the government in an off-the-record
sidebar, which was not recorded in the transcript. Upon the
conclusion of the sidebar, at the urging of the parties, the judge then
placed on the record the information that had just been discussed.
That disclosure concerned the district judge’s personal relationship
with Andrew Kaplan and his family. Kaplan was the former Chief
Marketing Officer of Platinum and a cooperating witness in ongoing
investigations and prosecutions in the Eastern District of New York
arising out of Platinum’s collapse. The district judge stated:
I have known Andrew Kaplan since he was born. He and
one of my daughters grew up together, went to school
together, were friends together. His sister and my eldest
daughter remain close friends. His father was a good
11
friend of mine but passed away about five, six years ago,
and his mother remains a very good friend of mine, so
there is that relationship.
United States v. Seabrook, 16-cr-467, Dkt. entry between #218 and #219,
July 17, 2018, Hearing Tr., 5:11–18. The district judge made no
mention about his having any involvement in, or knowledge of,
Kaplan’s role as a cooperating witness in the Platinum prosecutions.
See id. The judge further stated, “I can’t see that whatever happened,
whatever conduct occurred at Platinum affects the issues of this case,
which is an honest services issue.” Id. at 5:19–21. Neither the
government nor Seabrook objected to the judge continuing to preside
over Seabrook’s retrial. Id. at 6:1–3. It appears that the transcript of
this hearing was neither prepared nor posted to Seabrook’s docket in
the course of his prosecution.1 There is no indication that counsel for
1 We consider the record before us on appeal to be supplemented by that
transcript, which has now been prepared at the request of this Court, and we
therefore direct the Clerk of the Court to file it on the docket for this appeal.
12
Huberfeld or Rechnitz were at this hearing, or that these disclosures
were conveyed to them.
On August 15, 2018, following his individual re-trial, Seabrook
was convicted of all counts against him, and on February 8, 2019, the
district court sentenced him to 58 months of imprisonment followed
by three years of supervised release, and imposed $19 million in
restitution. This Court affirmed that conviction. 2 United States v.
Seabrook, 814 F. App’x 661 (2d Cir. 2020).
On May 25, 2018, Huberfeld pleaded guilty to a one-count
superseding information charging him with conspiracy to commit
wire fraud in violation of 18 U.S.C. § 371. This charge was based on
Huberfeld’s conspiracy with Rechnitz to defraud Platinum of the
2On February 23, 2023, the district court granted Seabrook’s motion for a
reduction of his sentence pursuant to 18 U.S.C. § 3582(c)(1)(A), relying on the
sentencing disparity between Huberfeld and Seabrook that resulted from
Huberfeld’s re-sentencing, discussed below. United States v. Seabrook, 2023 WL
2207585, at *3–4 (S.D.N.Y. Feb. 23, 2023). Seabrook’s carceral sentence was reduced
to the amount of time he had served by that point, which was approximately 21
months; Seabrook’s term of supervised release and the restitution he was ordered
to pay were unchanged. See id.13
$60,000 it paid for non-existent Knicks tickets—money that was
actually used by Rechnitz to bribe Seabrook. On February 12, 2019,
the district court sentenced Huberfeld principally to a term of 30
months of imprisonment followed by three years of supervised
release, and ordered restitution of $19 million to COBA, for which
Huberfeld was jointly and severally liable with Seabrook.
Huberfeld appealed, and on August 4, 2020, this Court vacated
his sentence, finding that the district court erred by applying the
Sentencing Guideline for commercial bribery rather than for fraud,
and erred in imposing restitution against Huberfeld as though he had
been convicted of the bribery scheme. United States v. Seabrook, 968
F.3d 224, 231–36 (2d Cir. 2020).
On remand, Huberfeld sent the district court a letter on
November 30, 2020, seeking reassignment of his case to a different
judge. Huberfeld’s letter was premised partially on the information
that first came to light during the July 17, 2018, pre-trial conference in
14
Seabrook’s re-trial before Judge Hellerstein. The information
discussed in that conference had not been disclosed to Huberfeld,
who had only “recently learned” of the relationship between Kaplan
and the district judge. App’x 261. Huberfeld’s letter contained
additional information which had not been disclosed by the judge in
the July 17, 2018, conference. Id. Specifically, it indicated that
Huberfeld had learned from witnesses who had spoken with Kaplan
that Kaplan considered the district judge to be “like a father” to him,
and that beginning around November 2016, the district judge and
Kaplan had discussed whether Kaplan should accept the
government’s plea offer regarding his Platinum-related criminal
conduct. App’x 262. Huberfeld’s letter asserted that in advising
Kaplan, the district judge and Kaplan had discussed the significant
monetary losses associated with the charges against Kaplan, and
Kaplan’s feelings towards other Platinum executives. Id. For reasons
15
that are not apparent, Huberfeld’s letter was never posted on the
public docket associated with his case.
On December 1, 2020, an entry was placed on Huberfeld’s
docket indicating that the case had been reassigned. The docket did
not indicate any reason for the reassignment, nor did it indicate that
it had occurred at a party’s request. Huberfeld’s case was reassigned
to Judge Lewis Liman, who sentenced Huberfeld principally to a term
of seven months of imprisonment followed by one year of supervised
release, and ordered restitution of $60,000 to be paid to Platinum.
C. Rechnitz’s sentencing
On October 16, 2019, the government filed its sentencing
submission in Rechnitz’s case, advising the court that it intended to
move for a downward departure at sentencing from the Guidelines
range, pursuant to Section 5K1.1. The government sought a
downward departure with “particular enthusiasm,” because
Rechnitz had been “one of the single most important and prolific
16
white collar cooperating witnesses in the recent history of the
Southern District of New York.” App’x 37. The government further
stated that “Rechnitz did not appear to know that Platinum was a
fraud, or even that it was a bad investment.” App’x 54.
On October 21, 2019, Rechnitz filed his sentencing submission.
He sought a non-custodial sentence of time served, and agreed with
the Probation Office’s determination that he should pay restitution of
$1,206,000, calculated as the NYPD’s loss of $6,000 and COBA’s loss
of $1,200,000 in management fees charged by Platinum. Rechnitz
argued that he should not be required to pay the full $19 million in
restitution because COBA’s losses were attributable to the
unforeseeable and independent collapse of Platinum, the result of
separate criminal conduct of which he had no knowledge and in
which he played no role.
On October 30, 2019, the district court issued an order
proposing revisions to the Presentence Investigation Report. Those
17
revisions included, among other things, a finding that Rechnitz “had
to know” both that Platinum was a “high-risk fund” and that
“Murray Huberfeld was willing to pay a bribe to obtain funds to
satisfy a liquidity shortage, thus making it reasonably foreseeable that
an investment of pension funds risked the loss of those funds.” App’x
131–32. The district court further ordered the Presentence Report
modified to propose restitution of $19 million to COBA, jointly and
severally with Seabrook and Huberfeld.
Both the government and Rechnitz responded to this order. On
December 6, 2019, the government noted in its submission that it had
no evidence that Rechnitz was aware of problems at Platinum, and
that it credited his trial testimony that he believed Platinum to be
financially sound. It further noted that Rechnitz was situated
differently than Huberfeld and Seabrook, because the former surely
knew of the issues at Platinum, and the latter received, ignored, and
concealed clear warnings about COBA’s investment in the hedge
18
fund. Rechnitz similarly disputed the district court’s factual assertion
that he was aware of the issues at Platinum, and again argued that the
losses caused by Platinum’s failure should not be attributed to him
for restitution purposes.
On December 20, 2019, the district court held Rechnitz’s
sentencing hearing. As to restitution, the court found that the losses
associated with Platinum’s failure were within the “zone of risk”
created by the bribery scheme, because “a bribe closes the mind of the
wise and avoids the kinds of skeptical judgment that are necessary
before investing fiduciary funds.” App’x 189. The court ordered
Rechnitz to pay COBA $10 million in restitution, jointly and severally
with Seabrook and Huberfeld, 3 a figure based on the size of the
investment by COBA that Rechnitz and Seabrook discussed initially,
and not based on the disputed factual findings included in the district
3 At the time of Rechnitz’s sentencing hearing, this Court had not yet ruled
on Huberfeld’s appeal, and thus Huberfeld’s initial sentence, including the full $19
million of restitution, remained standing. See Seabrook, 968 F.3d at 231–36.
19
court’s October 2019 Order. The court also sentenced Rechnitz to five
months of imprisonment, followed by three years of supervised
release (the first five months of which were to be served under house
arrest).
The court entered judgment on March 3, 2020, and Rechnitz
filed a timely notice of appeal.
D. COBA’s intervention
On February 27, 2020, after the oral imposition of the sentence
but before the judgment had entered, COBA moved for restitution
under the Crime Victims’ Rights Act, 18 U.S.C. § 3771, and the related
restitution provisions of the Mandatory Victim Restitution Act
(“MVRA”), 18 U.S.C. § 3664. COBA sought to hold Rechnitz jointly
and severally liable for its remaining $14.25 million loss following
Huberfeld’s then-payment of $4.75 million in restitution. 4 COBA
4 The district court initially denied COBA’s motion on the grounds that it
lacked jurisdiction to consider it. See United States v. Rechnitz, 2020 WL 1467888, at
*1–2 (S.D.N.Y. Mar. 26, 2020). This Court granted COBA’s petition for mandamus,
20
contended that Rechnitz was as culpable as Seabrook and Huberfeld,
and that he should be ordered to pay full restitution immediately.
Rechnitz opposed this motion on the grounds that it was untimely
and, even if it were timely, the district court had discretion to
apportion liability among defendants in proportion to their
culpability.
E. Rechnitz’s motion for reassignment and the district court’s
revised restitution order
On December 10, 2020, while COBA’s motion for additional
restitution was still pending, Rechnitz filed a motion seeking
reassignment to a different judge. That motion was born out of the
December 1, 2020, reassignment of Huberfeld’s case. Following that
reassignment—which did appear on the public docket in Huberfeld’s
case, though without explanation—Rechnitz’s counsel received from
returning jurisdiction to the district court with a mandate to “reconsider its
assessment of [Rechnitz’s] culpability and financial condition in light of the new
evidence presented by [COBA] and any other factors found relevant by the district
court.” See United States v. Rechnitz, 16-cr-389, Dkt. #92.
21
the government a copy of Huberfeld’s November 30, 2020, letter
requesting reassignment. Rechnitz’s receipt of Huberfeld’s request
for reassignment was the first notice he received of the relationship
between the district judge and Kaplan.
Rechnitz sought recusal to “avoid the appearance of any
impropriety and in an abundance of caution.” App’x 260. Rechnitz’s
primary concern was that the size of his restitution turned largely on
the credibility of his claim that he had believed “in the soundness of
Platinum Partners as an investment vehicle,” and that the district
judge might have obtained “extrajudicial” information regarding the
case from Kaplan, which Rechnitz would not have had the
opportunity to challenge. Id.On December 17, 2020, the district court entered a four-page
written order denying Rechnitz’s motion for reassignment. The judge
explained:
Kaplan’s father, who died more than 10 years ago, was
my close friend, and his family and mine have been close
22
for 55 years. I told his son after his father died that I
would be available to him to discuss any problem he
might have, as if I were his father. When Kaplan was
indicted and was offered a plea in exchange for his
cooperation, he came to me to help him think through his
options. . . . He asked me if he could discuss his concerns
with me. Although Kaplan had an excellent defense
lawyer, he felt that I had unique knowledge of his family
concerns and I felt that I should consider his request as if
it were made by my son and help him think through his
options.
App’x 264. These discussions, the district judge said, did not address
the “the underlying facts or law of the case against Kaplan.” Id. In
denying the motion for reassignment, the judge found that his
relationship with Kaplan, and the case pending against Kaplan in the
Eastern District of New York, were unrelated to the restitution issue
involving Rechnitz, in part because “there is no suggestion that
[Rechnitz] had any relationship with Kaplan.” App’x 265. The
district judge also stated that he had no “extra record information”
regarding Rechnitz or Platinum, that he did not believe that
Rechnitz’s restitution liability turned on his knowledge of the
23
“soundness” of Platinum, and that Huberfeld’s case was distinct from
that of Rechnitz, as Huberfeld was directly involved in Platinum. Id.Rechnitz moved for reconsideration. Among other things, he
argued that he and Kaplan had numerous interactions throughout the
COBA bribery and investment scheme, and that he had discussed the
relationship between the bribery and investment scheme during his
testimony in both the joint trial of Seabrook and Huberfeld (before
Judge Carter) and the subsequent retrial of Seabrook before Judge
Hellerstein. In his motion, Rechnitz characterized Kaplan as part of
“the core group” at Platinum that was involved in securing COBA’s
investment. Rechnitz also noted that his primary argument against
heightened restitution turned on whether COBA’s damages were
proximately caused by the bribe, which itself turned on whether the
intervening criminal conduct of those at Platinum (including Kaplan)
was to blame.
24
On January 8, 2021, the district judge entered a written ruling
that denied the motion for reconsideration. He rejected the premise
that Kaplan had served as one of Rechnitz’s “primary contacts” at
Platinum, and described Rechnitz’s arguments as “made-up, [and]
intended to create an issue for disqualification that does not exist.”
United States v. Rechnitz, 2021 WL 75671, at *2 (S.D.N.Y. Jan. 8, 2021).
That same day, the district court ordered Rechnitz to provide
personal financial information, previously disclosed only to the
Probation Office, directly to the district court and to COBA. Rechnitz
sought reconsideration of this order, noting that the law
presumptively bars the disclosure of such information to crime
victims. The district court denied this motion. United States v.
Rechnitz, 2021 WL 127228, at *1–2 (S.D.N.Y. Jan. 13, 2021). Rechnitz
petitioned this Court for a writ of mandamus seeking reassignment
of his case and barring the disclosure of his personal financial
information, which this Court granted as to the disclosure, but denied
25
as to the reassignment, concluding that Rechnitz had failed to satisfy
his exceptionally high burden on mandamus of demonstrating a
“clear and indisputable right to issuance of the writ on that issue.” In
re Jona Rechnitz, No. 21-77, Dkt. #62 (2d Cir. July 1, 2021).
On November 9, 2021, the district court granted COBA’s
motion against Rechnitz for the full amount of COBA’s remaining
unrecovered loss—by then, $12.01 million. See United States v.
Rechnitz, 2021 WL 5232395, at *9 (S.D.N.Y. Nov. 9, 2021). This decision
was based in part on Huberfeld’s resentencing, which significantly
lowered COBA’s ability to fully recover its losses. The court also
reiterated that the full $19 million of COBA’s loss was within the
“zone of risk” created by Rechnitz’s bribe, because “Rechnitz exposed
COBA to the risk that Seabrook, motivated by the bribe, would forego
the level of caution required of someone in his position.” Id. at *6.
Rechnitz filed a timely appeal of the revised restitution order.
26
F. The district court’s post-sentencing ex parte, off-the-record
communication
On December 23, 2022, while his appeal was pending before
this Court, Rechnitz filed a letter pursuant to Fed. R. App. P. 28(j) (the
“28(j) Letter”). The 28(j) Letter included, attached as an exhibit, a
letter dated December 1, 2022, from the United States Attorney’s
Office for the Southern District of New York to Rechnitz’s counsel,
documenting an ex parte, off-the-record phone call made by the
district judge on November 15, 2022, to the Assistant United States
Attorney working on Rechnitz’s case. 5 The government’s letter
summarized the phone call as follows:
• [The district judge] asked how much Mr. Rechnitz
has paid in restitution. He commented that he does
not like all of Mr. Rechnitz’s travel requests, and
said that such requests are reasonable
individually, but too frequent.
• [The district judge] also stated that Mr. Rechnitz is
sly, cannot be trusted, and uses religion as a cloak.
At oral argument, counsel for the government represented that there were
5
no additional ex parte communications between the district judge and the
government in the course of the case against Rechnitz.
27
• In response to [the district judge’s] request for
information about Mr. Rechnitz’s restitution, [the
AUSA] offered to ask Mr. Rechnitz’s counsel to
make a submission to the [district] [c]ourt
addressing the issue. [The district judge] asked
[the AUSA] not to speak to [Rechnitz’s] counsel
about this and instead advised her to find the
information from the Clerk of Court.
• [The district judge] expressed frustration with the
amount of time Mr. Rechnitz’s appeal has been
pending.
Dec. 23, 2022, 28(j) Letter, Ex. A, Gov’t Letter dated Dec. 1, 2022. 6
II. Discussion
On appeal, Rechnitz argues that the district court improperly
failed to recuse itself in violation of 28 U.S.C. § 455(a) and (b). In the
alternative, Rechnitz argues that the district court erred by ordering
him to pay restitution for all of COBA’s losses. For the reasons that
follow, we find that the district judge should have recused himself,
6 Fed. R. App. P. 28(j) permits a party to “advise the circuit clerk by letter”
of “pertinent and significant authorities [that] come to a party’s attention after the
party’s brief has been filed—or after oral argument but before decision.” The 28(j)
Letter, although styled as a filing pursuant to Rule 28(j), did not serve to flag
additional authorities for this Court, and is more accurately construed as a motion
to supplement the record. Neither party objects to our consideration of the letter,
and so we deem the record to have been supplemented.
28
and we remand the case for reassignment and plenary resentencing.
Accordingly, we do not reach the merits of Rechnitz’s challenge to the
restitution order.
A. Standard of review
We review a district court’s decision not to recuse itself for
abuse of discretion. United States v. Wedd, 993 F.3d 104, 114 (2d Cir.
2021). “A district court ‘abuses’ or ‘exceeds’ the discretion accorded
to it when (1) its decision rests on an error of law (such as application
of the wrong legal principle) or a clearly erroneous factual finding, or
(2) its decision—though not necessarily the product of a legal error or
a clearly erroneous factual finding—cannot be located within the
range of permissible decisions.” Zervos v. Verizon New York, Inc., 252
F.3d 163, 169 (2d Cir. 2001) (footnotes omitted). Given that standard,
we will rarely disturb a district court’s decision not to recuse itself.
29
See ISC Holding AG v. Nobel Biocare Fin. AG, 688 F.3d 98, 107 (2d Cir.
2012). 7
B. Statutory recusal under 28 U.S.C. § 455Rechnitz contends that the district judge should have recused
himself under 28 U.S.C. § 455(a), (b)(1), and (b)(5). Section 455(a)
provides that a judge “shall disqualify himself in any proceeding in
which his impartiality might reasonably be questioned.” Section
7 The government contends that Rechnitz raises a portion of his argument
for the first time on appeal, and it should therefore be reviewed only for plain
error. Specifically, it contends that Rechnitz failed to argue below that Kaplan,
who may be ordered to pay restitution for his role in the Platinum case, may have
a financial interest in the outcome of the restitution order against Rechnitz. We
are unpersuaded. To be sure, Rechnitz’s arguments for recusal are more
developed on appeal than they were before the district court. However, across his
initial motion for reassignment and his motion for reconsideration before the
district court, Rechnitz sufficiently flagged the restitution issue as a ground for
reassignment, and raised all the same statutory arguments that he raises here.
Accordingly, Rechnitz’s arguments on appeal can be fairly read into his arguments
before the district court, and we decline to apply plain error analysis. See United
States v. Sprei, 145 F.3d 528, 533 (2d Cir. 1998) (“In interpreting Rule 51, [this Court
has] emphasized that [a]n objection is adequate which fairly alerts the court and
opposing counsel to the nature of the claim.” (internal quotation marks omitted));
see also Wedd, 993 F.3d at 115 (applying plain error analysis to recusal issue where
defendant, among other things, failed to “invoke Section 455(a) at all below, or [to]
frame his request for reassignment in any way around an impropriety in the
district court continuing to preside over the case”).
30
455(b) requires, in relevant part, that a judge recuse himself in any
case where he has “a personal bias or prejudice concerning a party, or
personal knowledge of disputed evidentiary facts concerning the
proceeding,” or where “[h]e or his spouse, or a person within the third
degree of relationship to either of them” is “known by the judge to
have an interest that could be substantially affected by the outcome
of the proceeding” or is “to the judge’s knowledge likely to be a
material witness in the proceeding.” § 455(b)(1), (b)(5)(iii)–(iv).
We evaluate partiality under § 455(a) “on an objective basis, so
that what matters is not the reality of bias or prejudice but its
appearance.” Liteky v. United States, 510 U.S. 540, 548 (1994); see also
Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 860 (1988) (“The
goal of section 455(a) is to avoid even the appearance of partiality.”
(internal quotation marks omitted)). In making that objective
analysis, we consider “whether a reasonable person, knowing all the
facts, would conclude that the trial judge’s impartiality could
31
reasonably be questioned.” United States v. Thompson, 76 F.3d 442, 451
(2d Cir. 1996) (internal quotation marks and alteration omitted); see
also Code of Conduct for United States Judges, Canon 2(A) (“An
appearance of impropriety occurs when reasonable minds, with
knowledge of all the relevant circumstances disclosed by a reasonable
inquiry, would conclude that the judge’s honesty, integrity,
impartiality, temperament, or fitness to serve as a judge is
impaired.”). In close cases, “the balance tips in favor of recusal.”
Ligon v. City of New York, 736 F.3d 118, 124 (2d Cir. 2013) (internal
quotation marks omitted), vacated in part on other grounds, 743 F.3d 362(2d Cir. 2014).
Section 455(b) operates differently, requiring “actual
knowledge . . . regarding disqualifying circumstances and
provid[ing] a bright line as to disqualification based on a known
financial interest in a party.” Chase Manhattan Bank v. Affiliated FM
Ins. Co., 343 F.3d 120, 127 (2d Cir. 2003). A “known financial interest
32
in a party, no matter how small, is a disqualifying conflict of interest
and one that cannot even be waived by the parties.” Id. at 128.
Although these provisions outline distinct statutory routes to
disqualification, § 455(a) and § 455(b) have been considered in tandem
under certain circumstances. For example, in Chase Manhattan, the
district judge held a bench trial despite having a known investment
in Chase Bank, which was ultimately awarded a significant portion of
the verdict. Id. at 124, 130. On appeal, this Court held that the district
judge abused his discretion by not recusing himself, because “an
appearance of partiality requiring disqualification under Section
455(a) results when the circumstances are such that: (i) a reasonable
person, knowing all the facts, would conclude that the judge had a
disqualifying interest in a party under Section 455(b)(4)[;] and (ii)
such a person would also conclude that the judge knew of that interest
and yet heard the case.” Id. at 128. In other words, “Section 455(a)
33
applies when a reasonable person would conclude that a judge was
violating Section 455(b)[].” Id.
C. Application
On the unique facts of this case, we conclude that the district
judge abused his discretion by not reassigning the case pursuant to
§ 455(a).
First and foremost, the district judge had a close, near-paternal
personal relationship with Kaplan, a participant in conduct that is
sufficiently related to the criminal conduct with which Rechnitz is
charged. The district judge had known, and been close with, Kaplan
and his family since Kaplan’s birth. In his decision denying the
motion for recusal, the district judge explained that he had told
Kaplan after his father died that “I would be available to him to
discuss any problem he might have, as if I were his father.” App’x
264. That relationship was not only remarkably close; it was with a
person who was directly involved in Rechnitz’s bribery case. Kaplan
34
was mentioned in Rechnitz’s testimony—both in the initial joint trial
of Seabrook and Huberfeld and in the retrial of Seabrook before Judge
Hellerstein—several times as one of the Platinum employees involved
in securing the COBA investment. The government correctly points
out that Kaplan was not one of the most central figures in Rechnitz’s
bribe scheme. But Rechnitz’s testimony implicated Kaplan in
concealing the Platinum investment from other COBA employees—a
circumstance that placed Kaplan squarely in the middle of yet another
incidence of wrongdoing at a firm where, through his guilty plea, he
had already admitted to participating in a different criminal
conspiracy. In sum, the district judge had a close personal
relationship with Kaplan, who was directly implicated by Rechnitz in
improprieties connected with the COBA investment, which in turn
was an object of the bribery conspiracy with which Rechnitz was
charged. That relationship alone, in light of these factual
35
circumstances, was sufficient to raise serious questions about the
need for recusal.
But the facts here are even more complicated. The district judge
did not merely have a close personal relationship with Kaplan; he
advised Kaplan on his criminal case arising out of the Platinum
collapse. As the district judge wrote in his order denying Rechnitz’s
motion for reassignment: “When Kaplan was indicted and was
offered a plea in exchange for his cooperation, he came to me to help
him think through his options.” App’x 264. Thus, this is not merely
a case where the district judge had a close relationship with a person
involved in the underlying factual narrative of the case. Rather, the
district judge here advised someone he regarded as a son on how to
proceed with respect to his own criminal matter.
This close relationship, and the district judge’s advisory role, is
further problematic in light of the restitution question, because
Kaplan and Rechnitz’s interests are plausibly adverse on that issue.
36
COBA, of course, can recover its losses only once, even though two
groups—those involved in the bribery scheme and those involved in
the fraud—arguably caused them. See United States v. Nucci, 364 F.3d
419, 423–24 (2d Cir. 2004) (MVRA does not permit double recovery).
It therefore remains uncertain from whom COBA will recover the $19
million it lost. Because Kaplan is a defendant in the Platinum case, it
is possible that he will be ordered to pay restitution. There is thus a
reasonable and apparent relationship between COBA’s recovery from
Rechnitz, Seabrook, and Huberfeld 8 (the defendants in the bribery
case) and its possible recovery from the defendants in the Platinum
case (including Kaplan): the more COBA recovers from the bribery
defendants, the less it will need to recover from the Platinum
defendants. 9 We conclude that this unusual combination of facts—
8 As previously noted, Huberfeld’s restitution in the bribery case could not
extend to COBA’s losses because he pleaded guilty only to charges involving wire
fraud against Platinum, not to charges involving bribery and/or fraud against
COBA. Seabrook, 968 F.3d at 231–36.
9 Kaplan had not yet been sentenced as of June 2, 2023, the date of oral
argument in this case. Of more relevance to our inquiry is the corollary fact that
37
namely the judge’s close relationship with Kaplan, his advisory role
in Kaplan’s criminal case, and the proximity of the cases (including
with respect to restitution)—would cause a reasonable person to
question the district judge’s impartiality and was sufficient to
necessitate recusal under § 455(a).
We note that this potential overlap in restitution obligations
between Kaplan and Rechnitz militates in favor of recusal by the
district judge under § 455(a), even though § 455(b) is not technically
violated. As stated above, a judge must recuse himself where “a
person within a third degree of relationship” to the judge was
“known by the judge to have an interest that could be substantially
affected by the outcome of the proceeding.” See 28 U.S.C.
§ 455(b)(5)(iii). To be sure, Kaplan does not possess the necessary
degree of blood relationship to the district judge to give rise to a
technical violation of 28 U.S.C. § 455(b)(5)(iii). See Code of Conduct
Kaplan had certainly not been sentenced at the time the district judge determined
Rechnitz’s restitution obligations.
38
for United States Judges, Canon 3(C)(3)(a) (“[T]he degree of
relationship is calculated according to the civil law system; the
following relatives are within the third degree of relationship: parent,
child, grandparent, grandchild, great grandparent, great grandchild,
sister, brother, aunt, uncle, niece, and nephew; the listed relatives
include whole and half blood relatives and most step relatives . . . .”).
But whether Kaplan was a sufficiently close blood relation to require
recusal under § 455(b) is not the end of the story: the facts of this case
show that Kaplan and the district judge regarded one another as
having a relationship as close as such a blood relation. The district
judge, recall, had told Kaplan that he would be available to him “as if
[he] were his father.” App’x 264. This was the functional equivalent
of a relationship that creates the objective appearance of a § 455(b)
39
violation, and it therefore required recusal under § 455(a). 10 See Chase
Manhattan, 343 F.3d at 128.
The distinction the district judge drew between Huberfeld and
Rechnitz to justify his decision to recuse himself as to the former but
not the latter is unpersuasive. The crux of the recusal inquiry as to
Rechnitz is the appearance of impropriety created by the district
court’s relationship to a defendant in the Platinum case, the advisory
role that the judge played in that defendant’s proceedings, and the
overlap between the Platinum matter (including, potentially,
restitution issues) and the bribery cases before the district court. The
mere fact that Rechnitz, unlike Huberfeld, was not also a defendant
in the Platinum case does not render recusal unnecessary. Further,
10 Any financial interest of Kaplan in the restitution of Rechnitz may be
minimal. Platinum had upwards of a billion dollars under management, and
COBA’s losses, as a percentage of Platinum’s total losses, may be quite small. That
notwithstanding, even minor financial interests run afoul of § 455(b). See Chase
Manhattan, 343 F.3d at 128 (holding that recusal was required under § 455(a)
because a reasonable person could find a violation of § 455(b), despite the
judgment for Chase Manhattan Bank being so small relative to the firm’s size that
it would not cause a “discernable” increase in the share values owned by the
district judge, which were themselves not even 1% of the judge’s personal assets).
40
we note our puzzlement over the district judge’s decision to alert only
Seabrook to the potential conflict arising out of his relationship with
Kaplan. This selective disclosure undercuts the distinction drawn
between Huberfeld and Rechnitz for recusal purposes—Seabrook,
after all, was no more involved in Platinum’s collapse than Rechnitz.
In any event, disclosure of the Kaplan relationship should have
been made to Rechnitz. At least in these circumstances, it is not
apparent why disclosure was appropriate for only one of three
charged co-conspirators. That is not to say that in all cases recusal
will necessarily be required for all co-defendants if it is required for
one. However, this case presents an object lesson in the importance
of early disclosure: significant time and resources could have been
saved if the district judge had simultaneously given Huberfeld and
Rechnitz the same disclosure regarding his relationship to Kaplan
that he gave to Seabrook.
41
Having concluded that these considerations alone are sufficient
to warrant reassignment, we pause to express our concerns about the
district judge’s post-sentencing communication with the United
States Attorney’s Office, conducted ex parte and off the record. We
have previously emphasized that “the preferred way to proceed in
criminal cases is under the assumption that nothing is ‘off the
record.’” United States v. Amico, 486 F.3d 764, 779 (2d Cir. 2007). True
of course, but perhaps understated. A comprehensive record,
particularly in a criminal case, is a paramount feature of fair
proceedings. A full record not only protects the rights of the parties
and enables future proceedings—including, of course, appeals that
come before this Court—but also preserves and promotes
transparency, a feature “pivotal to public perception of the judiciary’s
legitimacy and independence.” See United States v. Aref, 533 F.3d 72,
83 (2d Cir. 2008). In the unusual circumstance where a court reporter
is unavailable, a district court is well-advised to promptly place on
42
the record a full description of such communications. See, e.g., United
States v. Mejia, 356 F.3d 470, 475 (2d Cir. 2004) (“[T]he proper practice
for a jury inquiry and response thereto is as follows: (1) the jury
inquiry should be in writing; (2) the note should be marked as the
court’s exhibit and read into the record with counsel and defendant present;
(3) counsel should have an opportunity to suggest a response, and the
judge should inform counsel of the response to be given; and (4) on
the recall of the jury, the trial judge should read the note into the record
. . . .” (citation omitted) (emphasis added)).
We recognize that courts are often confronted with information
that may not be appropriate for public disclosure, such as grand jury
materials, national security information, or cooperation in criminal
investigations, to name a few. But the proper way to address any
overriding interests in the confidentiality of such information—
whether temporary or longer term—is not to keep it off the record.
Instead, the court should ensure that the information is placed on the
43
record in some appropriate fashion and then carefully evaluate
whether sealing or some other precautionary measure is warranted.
See United States v. Amodeo, 44 F.3d 141, 147 (2d Cir. 1995) (“Amodeo I”)
(“While we think that it is proper for a district court, after weighing
competing interests, to edit and redact a judicial document in order
to allow access to appropriate portions of the document . . . [i]t seems
to us that the district court should make its own redactions, supported
by specific findings, after a careful review of all claims for and against
access. Such findings would provide us with a basis for effective
review in the event of a future appeal.” (citations omitted)); see also,
e.g., United States v. Amodeo, 71 F.3d 1044, 1050 (2d Cir. 1995) (“Amodeo
II”) (“One consideration [in limiting public access to judicial
documents] is whether public access to the materials at issue is likely
to impair in a material way the performance of Article III functions”
by “adversely affect[ing] law enforcement interests or judicial
performance. [For example,] [o]fficials with law enforcement
44
responsibilities may be heavily reliant upon the voluntary
cooperation of persons who may want or need confidentiality.”); In re
Grand Jury Subpoena, 103 F.3d 234, 242 (2d Cir. 1996) (“Even if the
presumption of openness attaches to th[e] qualified right [of access to
criminal proceedings], however, it is overcome in the grand jury
context by the overriding interest in secrecy.”); Fed. R. Crim. P. 6(e)(6)
(“Records, orders and subpoenas relating to grand jury proceedings
must be kept under seal to the extent and as long as necessary to
prevent the unauthorized disclosure of a matter occurring before a
grand jury.”).
Ex parte communications are similarly disfavored, particularly
in the criminal context. “[A] judge should not initiate, permit, or
consider ex parte communications” unless “authorized by law[,]”
“when circumstances require it . . . for scheduling, administrative, or
emergency purposes” (and even then, “only if the ex parte
communication does not address substantive matters and the judge
45
reasonably believes that no party will gain a[n] . . . advantage as a
result of the ex parte communication”), or “with the consent of the
parties, [to] confer separately with the parties and their counsel in an
effort to mediate or settle pending matters.” Code of Conduct for
United States Judges, Canon 3(A)(4)(a)–(b), (d). In other words, ex
parte communications are the exception rather than the rule, and they
require particular justification. See, e.g., Aref, 533 F.3d at 81 (“[E]x
parte, in camera hearings in which government counsel participates to
the exclusion of defense counsel are part of the process that the district
court may use [under the Classified Information Procedure Act and
Fed. R. Crim. P. 16] in order to decide the relevancy of [classified]
information.” (internal quotation marks omitted)); In re Grand Jury
Subpoenas Dated March 19, 2002 and August 2, 2002, 318 F.3d 379, 386
(2d Cir. 2003) (submission of documents to court for in camera, ex parte
review is “a practice both long-standing and routine in cases
involving claims of privilege” (citations omitted)); In re John Doe Corp.,
46
675 F.2d 482, 490 (2d Cir. 1982) (in camera, ex parte submission is
appropriate where it is the only way to resolve an issue without
compromising the need to preserve the secrecy of the grand jury).
The concerns created by unwarranted ex parte communications are
particularly acute in criminal matters, subject, as they are, to
heightened due process concerns. See, e.g., United States v. Napue, 834
F.2d 1311, 1318–19 (7th Cir. 1987) (“Ex parte communications between
the government and the court deprive the defendant of notice of the
precise content of the communications and an opportunity to
respond.” (citing In re Taylor, 567 F.2d 1183, 1187–88 (2d Cir. 1977))).
The district judge’s phone call with the prosecutor here was
doubly ill-advised because it was both ex parte and off-the-record,
magnifying the concerns inherent to both types of communications.
After all, but for the commendable transparency of the United States
Attorney’s Office, Rechnitz would not have learned of this phone call.
Further, there is no obvious justification for conducting this particular
47
inquiry ex parte and off-the-record. A public docket entry requiring
an update from the parties would have been equally effective to
monitor Rechnitz’s restitution payments, as would have an internal
inquiry from the court to the Probation Office or to the Clerk of Court.
And to the extent that the district judge felt the need to emphasize his
views on Rechnitz’s allegedly negative qualities, such statements
should be reserved for open, on-the-record forums, if shared at all.11
We underscore the unique set of facts presented by this case,
and accordingly the limited nature of our holding. “Remanding a
case to a different judge is a serious request rarely made and rarely
granted.” United States v. Singh, 877 F.3d 107, 122 (2d Cir. 2017)
(internal quotation marks omitted). “Disqualification is not required
11 To be sure, “opinions formed by the judge on the basis of facts introduced
or events occurring in the course of the current proceedings, or of prior
proceedings, do not constitute a basis for a bias or partiality motion unless they
display a deep-seated favoritism or antagonism that would make fair judgment
impossible.” Liteky, 510 U.S. at 555; see also Wedd, 993 F.3d at 115 (“Ordinarily,
Section 455(a) will not require recusal based on a judge’s comments during a
proceeding that are critical or disapproving of, or even hostile to, counsel, the
parties, or their cases.” (internal quotation marks omitted)).
48
on the basis of remote, contingent, indirect or speculative interests.”
Thompson, 76 F.3d at 451 (internal quotation marks omitted). We are
convinced that this record presents the rare case where failure to
recuse amounted to an abuse of discretion. The district judge’s
relationship with Kaplan was not that of a mere acquaintance or even
an ordinary friend. Rather, the judge made clear that he made himself
available to Kaplan “as if [he] were his father.” App’x 264. Nor is this
a case where a close relation was involved in tangential facts, the
details of which the district judge carefully avoided. On the contrary,
Kaplan is a defendant in a nearby district for related criminal conduct
with interests that are plausibly adverse to Rechnitz’s with respect to
restitution, and the district judge advised Kaplan on how to proceed
with respect to his criminal exposure.
Finally, it bears note, this is not a case where a party sat on its
hands despite knowing the basis for recusal, hoping for a favorable
result, but intending to play the recusal card if sentencing did not go
49
his way. Rather, Rechnitz filed his motion for reassignment mere
days after learning of the judge’s relationship. Nor could reasonable
diligence have alerted Rechnitz to the district judge’s conflict earlier.
The district judge disclosed the relationship to only one co-defendant
(Seabrook), and even then, many of the relevant details, including the
judge’s advice to Kaplan, came to light only after Huberfeld’s counsel
happened to speak to certain witnesses and requested recusal.
Moreover, Huberfeld’s recusal request, along with its additional
details, was inexplicably not placed on the public record, such that
Rechnitz learned of it only after the government provided disclosure.
The late factual revelations coupled with Rechnitz’s diligent pursuit
of reassignment allay any concerns of gamesmanship that might arise
in other cases.
III. Conclusion
In sum, we hold as follows:
50
1. The district court abused its discretion in failing to recuse
itself, because the court’s close, advisory relationship
with a criminal defendant in a related case, whose
financial interests were plausibly adverse to Rechnitz’s,
would lead a reasonable observer to conclude that the
district judge’s impartiality could be questioned.
2. Given that holding, we need not reach Rechnitz’s
challenge to the merits of his restitution order.
We therefore REMAND with instructions that the case be
reassigned to a different district judge for plenary resentencing.
51