Sfara Bruno subject of criminal tax probe

The lawyer underestimated her net worth by more than $1 million, the government alleges.
CLEVELAND -- Boardman attorney Lynn Sfara Bruno may be off the hook for fixing DUIs, but she failed to tell the IRS how much money clients really paid her for the fixed cases, the government says.
The revelation is contained in the government's 77-page challenge to Sfara Bruno's request to recoup $73,161 in legal fees and other expenses she incurred gearing up for trial. Her lawyers want U.S. District Judge Kathleen M. O'Malley to conclude that actions by the FBI and federal prosecutors were "vexatious, frivolous and/or in bad faith."
Sfara Bruno's lawyers base her right to remuneration on the Hyde Amendment. The federal legislation was enacted to curb prosecutorial abuse and allow a winning defendant to collect reasonable attorney fees and litigation costs. It was also enacted to deter prosecutors from bringing an unfounded indictment.
The charges: Sfara Bruno's two-count indictment, handed up Sept. 12, 2001, charged extortion and conspiracy to commit extortion. The government said Sfara Bruno gave James A. Philomena cash, gifts and campaign contributions between January 1991 and December 1996 to fix cases when he served as Mahoning County prosecutor.
At the government's request, Judge O'Malley dismissed Sfara Bruno's indictment on Nov. 9. The trial had been set for Dec. 4.
"Under ordinary circumstances, the government would not acknowledge the existence of a criminal [tax] investigation," Thomas J. Gruscinski, an assistant U.S. attorney, said in his response.
Why now? He disclosed it now to prevent Sfara Bruno, 41, of Southwoods Boulevard, from saying that the tax investigation, which began before dismissal of the bribery indictment, is retaliation for her request for legal fees.
In challenging Sfara Bruno's motion for fees, Gruscinski said she "utterly ignores the fact that she is still the subject of a valid, ongoing criminal tax investigation. She has not been vindicated."
Reached for comment, Sfara Bruno referred questions to one of her Cleveland lawyers, John F. McCaffrey. McCaffrey said he was reserving comment until he sees the government's filing.
In late September, Gruscinski told McCaffrey, that "win, lose or draw" at trial, the government intended to seek criminal tax charges against her. The conversation took place just minutes before Sfara Bruno's bribery arraignment, according to the motion.
A month later, McCaffrey, the federal prosecutor said, acknowledged that his client "has tax problems," as did McCaffrey's investigator, who acknowledged Sfara Bruno had filed false tax returns.
As an example, Gruscinski cited one DUI client from whom Sfara Bruno collected $10,000 but reported only $2,500 to the IRS. "The same pattern held true for virtually all of the cases listed in [Sfara Bruno's] indictment," he said.
Double checked: When Sfara Bruno refused to produce her billing records, the government obtained a list of her clients from her accountant and compared what the clients said they paid with what she reported. Some clients testified at the grand jury that indicted her.
On Nov. 2, Sfara Bruno agreed to plead guilty to tax charges if the bribery indictment was dismissed -- then changed her mind two days later, Gruscinski said. He began to prepare for the Dec. 4 bribery trial and went to Youngstown to reinterview witnesses.
Gruscinski's filing devotes page after page explaining why, on Nov. 9, the government decided to drop Sfara Bruno's bribery case. That decision did not affect the tax investigation, he said.
The federal prosecutor said that, without his knowledge or authorization from Philomena's lawyers, McCaffrey and others interviewed Philomena in jail on Oct. 9. The interview took place just hours after Philomena testified at the racketeering trial of Russell J. Saadey (found guilty) and James A. Vitullo (found innocent).
A portion of the $73,161 Sfara Bruno seeks represents hours her two lawyers and their investigator sat in court listening to Philomena's testimony and for a transcript of the very same testimony.
After the jail interview, Gruscinski said, Philomena's recollection of a September 1996 DUI case wavered, though he still maintained that Sfara Bruno had paid him several times to fix other DUIs. With the 1996 case in doubt, the government had none in the indictment that met the five-year statute of limitations.
When McCaffrey suggested that "on paper" the 1996 case didn't appear to be fixed, the government had it reviewed by an independent witness, who on Nov. 6 agreed with McCaffrey. The government then sought to dismiss Sfara Bruno's indictment.
"In any of these situations, it was not the outcome of the DUI case that was illegal," Gruscinski said in court papers. "It was [Sfara Bruno's] payment of a bribe to Philomena that was illegal -- regardless of what ultimately happened in return."
The government gave Sfara Bruno the benefit of the doubt by dismissing her indictment a month before trial, Gruscinski said. Ironically, her lawyers had contended that Philomena lacked credibility -- until they interviewed him at the jail and he wavered on the 1996 DUI case, the federal prosecutor said in court papers.
If the government had been acting in bad faith, it would have proceeded to trial rather than dismiss when a witness changed his testimony, Gruscinski said.
Had the government intended to ruin Sfara Bruno's reputation, as she contends, prosecutors would have elicited all her "dirty laundry" through Philomena's testimony at the Saadey-Vitullo trial, Gruscinski said.
"The government had the opportunity to smear Sfara Bruno with impunity but did not," he said. "In fact, when Sfara Bruno's name surfaced on cross-examination, the government objected."
Likely testimony: Had the Sfara Bruno bribery case gone to trial, Philomena, now in federal prison, would have testified that he engaged in case-fixing schemes with Sfara Bruno, Gruscinski said. Michael P. Rich, an ex-lawyer who pleaded guilty to case fixing, would have testified that he told her how to fix cases and that she followed his advice, using Philomena to fix five or six cases, the government said.
Although Sfara Bruno's indictment listed only extortion, the evidence would have supported racketeering charges as well, Gruscinski said in court papers.
"Boiled down to its factual allegations, [Sfara Bruno's] complaint is not in how the case was investigated, prosecuted or dismissed," Gruscinski said. "It is the fact that she was investigated and prosecuted at all."
Among its many challenges to Sfara Bruno's request for fees and expenses, the government said her net worth exceeds $2 million, which disqualifies her from the Hyde Amendment. Although she listed her assets at $1,051,500, the government said it found an additional $1,163,600 and didn't even count her jewelry, furs, furniture and holdings in Bruno's Restaurant.
Protected copy: The government has also asked Judge O'Malley to determine how Sfara Bruno obtained a copy of Philomena's June 15, 1999, interview with the FBI, which was protected by court order. Portions of the interview are quoted in Sfara Bruno's motion to recoup fees.
Prosecutors had made the document available to the defense in the Saadey-Vitullo trial, but not to Sfara Bruno.

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