New York Federal Criminal Practice Blog

Recently in the Joinder category:


Limiting instructions are the opium of judges, but of little solace to a defendant, like Douglas Brandon, charged with securities fraud in an indictment that also charged an entirely separate securities fraud scheme against some of his co-defendants.  A substantial portion of the trial, therefore, involved evidence of wrongdoing that had nothing to do with him, leading to the possibility of substantial spillover prejudice and dilution of an important exculpatory statement from a cooperating witness that Brandon was not a knowing participant in the fraud scheme charged against him.

At issue in his appeal and that of one of his co-defendants was the district court’s denial of their misjoinder/severance motions under Rules 8(b) and 14.  Affirming in United States v. Rittweger, 05-3600-cr, 2008 WL 1808260 (2d Cir. April 23, 2008), the Court found that the indictment satisfied Rule 8(b)’s joinder requirements – either a “common plan or scheme” or a “substantial identity of facts and participants” – where it charged that both fraud schemes involved efforts to induce customers of a certain investment entity to invest in a particular investment program, and involved an overlap of two other defendants.

Significantly, the Court rejected the defendants’ argument that they should only have been joined in the same trial where their separate and distinct conspiracies could have been charged as a single conspiracy.  “Provided that the defendants are ‘alleged to have participated in the same act or transaction, or in the same series of acts or transactions, constituting an offense or offenses,’ Fed.R.Crim.P. 8(b), members of two or more conspiracies may be joined as defendants even where the members have not been charged as participating in one overarching conspiracy.” 

In addition, the Court rejected the defendants’ efforts to broaden appellate review of the Rule 8 joinder question to encompass an analysis of the evidence adduced at trial.  “Under the plain language of Rule 8(b), the decision to join parties turns on what is ‘alleged’ in the ‘indictment.’ Fed.R.Crim.P. 8(b).  Events that transpire at trial are thus not relevant to the Rule 8(b) inquiry.” And in a footnote, the Court observes, without deciding, that “the plain language of Rule 8(b) does not appear to allow for consideration of pre-trial representations not contained in the indictment, just as the language of the Rule does not allow for the consideration of evidence at trial.” 

The defendants were then left with arguing the uphill battle that the court should have exercised its discretion to sever under Rule 14, a burden that requires a showing of “prejudice so severe that [their] conviction[s] constituted a miscarriage of justice.”  The Court dispatched this claim quickly, finding that the evidence was “straightforward” as to each defendant, and – you guessed it – the Court gave limiting instructions throughout the trial.

This is a very unfortunate ruling, since it effectively insulates the government’s joinder decision from appellate review – and indeed, in light of the Court’s footnote, greatly stymies the district court’s analysis of the issue – as long as the government manages to make sufficient, however tenuous, allegations in the indictment to satisfy Rule 8(b).  At  least, the court recognized itself the carte blanche it is granting prosecutors with this decision, since it “question[s] the government’s decision to try the two conspiracies together,” given the lack of connection between the two conspiracies and the two defendant-appellants, the improbability that evidence of one conspiracy would have been admissible as background in the trial of the other had the defendants been tried separately, and the dangers of “lumping together” minor participants with discrete roles with the more prominent members of overlapping conspiracies.  The Court goes on, in language worth quoting in all severance motions: “Rule 8(b) does not provide the government with limitless discretion to join defendants and does not absolve the government from an independent obligation to consider the unfairness that may result from joinder.”

The Court’s Brady analysis in this decision – although of little consolation to Brandon – is also worth quoting in future Brady motions.  A cooperating witness had corroborated Brandon’s defense – that he had been kept in the dark as to the fraudulent nature of the investment scheme.  The government waited until a week before trial to turn over the grand jury testimony of this cooperating witness, and moments before an agent testified before turning over the witness’s proffer notes – notes which included the witness’s statement that she had been instructed: “Don’t tell Brandon anything” because he was “there for marketing purposes.”  (Imagine what fabulous fodder for an opening statement that would have been . . .)  The court quite rightly rejected the government’s justification for the late disclosure, that it had concluded from other circumstantial evidence that Brandon had gleaned knowledge of the fraudulent nature of the scheme from other sources.  The Court pointed out: “[f]requently, the government comes into possession of evidence by witnesses who identify another perpetrator or who attempt to exculpate another defendant. The fact that the government may have some evidence that a particular defendant is guilty does not negate the exculpatory nature of the testimony of a witness with knowledge that a defendant did not commit the crime as charged.”

A trial is primarily a theatrical event, and theatre depends on drama, narrative, development of expectation, choreography and timing.   As psychological research of juries has established, jurors seek narratives about guilt and innocence as the trial unfolds.  Mid-trial, if they have already constructed that narrative, they may not be as motivated to deconstruct the pieces and put them back together again.  When key exculpatory evidence is withheld until mid-trial, the defendant’s theatrical capabilities – and thus, ability to influence the jurors’ conception of the narrative – are severely handicapped.  But an appellate court does not address ephemeral and intangible matters like theatricality and story-construction.  In this case, not surprisingly given the scope of its review, the Court found that there was no “reasonable probability” that the late disclosure resulted in a different outcome.  The Court notes dryly, “[f]irst and foremost, the district court admitted into evidence Allen’s grand jury testimony and Agent Lubman’s debriefing notes.”  Yes, eventually.  But trial lawyers know better.  Mid-trial disclosure is no-where near as useful to the defendant, since it denies effective use of the information throughout the trial, and in particular, in opening statements, when jurors have not yet constructed any particular narrative.
At least, in demands for cooperating witness’s grand jury testimony and proffer notes, defense practitioners should make sure to quote the Court’s conclusion that “the government should have acted in favor of disclosing the Brady material earlier, particularly when earlier discovery would not have had the potential to harm the witness. . . . After all, the government produced 200 boxes of materials in the fall of 2002 to defense counsel, but withheld until May 1, 2003 (the eve of trial) the evidence that the government counsel surely should have known defense counsel was most interested in.”

The KPMG tax fraud prosecution, the largest in U.S. history and currently pending in the SDNY, has kept Judge Kaplan’s law clerks burning the midnight oil, with twenty-one decisions on Westlaw to date.  The latest, added to the database last week, United States v. Stein, 2007 WL 3025658 (S.D.N.Y. October 12, 2007), addresses the government’s motion to introduce evidence of the defendants’ “other acts” at trial under Fed.R.Evid. 404(b).  A trial can be lost before it ever begins if there’s an adverse ruling on 404(b) evidence, so it’s always good to hear of a decision one can cite where the government’s 404(b) motion was denied, to counter the hundreds of others the government can marshal in its favor. 

Stein involves tax shelter schemes that allegedly employed sham transactions to generate phony tax losses.  The government sought to introduce at trial evidence relating to uncharged tax shelters, side payments from some defendants to another and personal tax evasion by three of the four defendants.  The court denied all motions with leave to renew two if the trial placed them in a different light. 

Interestingly, while questioning whether any of the proffered evidence met the requirements of Rule 404(b) for admission (i.e. was probative of motive, intent, knowledge, identity, plan, absence of mistake, etc.), the court excluded all the evidence under Fed.R.Evid. 403, on the grounds that any probative value was outweighed by its likely prejudicial effect. 

In particular, with regard to uncharged acts of tax evasion, the court rejected the government’s citation of numerous cases where similar evidence was admitted.  “These cases . . . establish only that uncharged acts of evasion may be admitted to show intent. They do not require admission or dictate an outcome in the Rule 403 analysis” (my emphasis).

Also noteworthy is the court’s rejection of the government’s argument that evidence of uncharged transactions is admissible to show “relationships among alleged co-conspirators,” an argument the government often raises to rescue a 404(b) proffer that smacks of establishing the defendant’s propensity for crime.  Accepting that relationship evidence is “an appropriate not-for-character purpose under Rule 404(b),” the court nonetheless rejected the adequacy of the proffer, pointing out:  “The government has not explained its assertions that these relationships are relevant and that the evidence is probative of them, much less why it is necessary or helpful to get into the details of these other transactions beyond simply adducing evidence that the alleged coconspirators in fact had prior relationships involving uncharged transactions.”  In other words, Stein is a useful precedent for the proposition that the government can introduce the fact of prior relationships, but not the details of prior (criminal) activities together. 

Stein is a treasure trove of other interesting, useful and cautionary decisions.  Since most predate the establishment of this blog, I will note them briefly here:

  • Indictment Dismissed as to Thirteen Defendants Due to Government’s “Conscience Shocking” Misconduct: In the mother of all decisions, 495 F.Supp.2d 390 (S.D.N.Y. 2007), the court dismissed the indictment as to thirteen defendants due to the government’s inducement of KPMG’s cut-off of defense costs for its former employees, thus denying the defendants’ right to (expensive) counsel of choice.  This unusual set of facts is unlikely to be repeated but the case is currently the subject of an interlocutory appeal and likely to yield an interesting decision from the Second Circuit on the parameters of conduct meriting the extraordinary remedy of a dismissal of an indictment. 
  • Defense Lawyer Denied Permission to Withdraw: Cautionary tale involving defense lawyer who had only received $200,000 upfront for representation likely to exceed $1.5 million.  Court denied him permission to withdraw after client became insolvent, where lawyer had relied on unsecured promises of funds to come, rather than “the more careful or prudent approach” of obtaining a security interest in the defendant’s home.  The court offered to alleviate the burden somewhat by appointing the lawyer under the Criminal Justice Act and authorizing a waiver on maximum limits as well as interim payments.  488 F.Supp.2d 370 (S.D.N.Y. 2007).
  • Fact that Defense Lawyer’s Firm Previously Represented Trial Witness Was Waivable Conflict:  The court denied the government’s motion to disqualify defense counsel on the grounds that attorneys at the same firm had represented two trial witnesses, where defendant made knowing and intelligent waiver of conflict, and his lawyers would not be permitted in any way to participate in cross-examination of those witnesses.  410 F.Supp.2d 316 (S.D.N.Y. 2006).  The decision is a useful in-depth primer on the issue of the right to conflict-free representation.
  • Defendant-Employee’s Conversations with Employer’s In-House and Outside Counsel Not Privileged:  Indicted former partner at KPMG sought suppression of certain statements she had made to KPMG’s in-house and outside counsel on the grounds that they were protected by attorney client privilege.  Reviewing several circuits’ consideration of this thorny problem, the court found persuasive the view that individual privilege may be asserted successfully only when communications regarding individual acts and liabilities are segregable from discussions about the corporation.  Here, however, where the defendant’s personal interests and the corporate interests were not divisible, the claim of privilege failed. 463 F.Supp.2d 459. 
  • Government Must Produce Rough Notes Taken by Government Agents During Interviews with Defendants: In this useful decision worth citing in all discovery motions, the court analyzed the current version of Fed.R.Crim.P. Rule 16, adopted in 1991, and held that the government must produce rough notes of interviews with defendants even where government produced more formal summaries created from those notes.  424 F.Supp.2d 720 (S.D.N.Y. 2006)
  • Government’s Motion to Sever Denied: Court denied government’s motion to sever one defendant, where the government was in the controlling position to determine how the case initially was charged, and there was no showing of government prejudice by denying the motion, nor any showing of increased efficiency by granting it.  497 F.Supp.2d 565 (S.D.N.Y. 2007).

Trying to convict a defendant on personal tax evasion if nothing else is a well-worn prosecutorial strategy.  But it is one that backfired in United States v. Shellef, 2007 WL 3286908 (2d Cir. November 8, 2007), decided last week.  In a rare reversal on misjoinder grounds, the Second Circuit vacated the convictions of two defendants because the government had improperly charged one defendant with tax fraud counts related to unreported personal and corporate income that had nothing to do with the conspiracy and wire fraud schemes that formed the basis of the other charges against the defendants. The challenged tax counts in fact predated and had "no meaningful overlap" with the main conspiracy in the indictment.  As the Court held, "the fact that the businesses that produced the 1996 unreported income [that formed the basis of the tax counts] were also subsequently used to perpetrate the alleged conspiracy and wire fraud does not justify a conclusion that the offenses charged are 'based on the same act or transaction, or are connected with or constitute parts of a common scheme or plan,' under Rule 8(a)," governing joinder of offenses.  The Court thus reiterated a previous holding that "[t]ax counts may be joined with non-tax counts where it is shown that the tax offenses arose directly from the other offenses charged," usually where the "funds derived from non-tax violations either are or produce the unreported income."

The Court found the error was not harmless here where the risk of prejudice was great.  The jury could have concluded that the defendant's willingness to lie to the IRS indicated a willingness to lie both to the victims of the later fraud, and, since the defendant testified at trial, to the jury itself.  The adverse implications could also have had a spillover effect on the co-defendant, especially since he did not testify.  A critical factor in the Court's decision was the fact that the trial court failed to give any limiting instructions to the jury as to the use of the tax count evidence in its deliberations on the non-tax counts.  But here, it is hard to see how any jury could have genuinely followed such a limiting instruction once the bad act was out of the bag. 

See Archives for all posts since September 2007.