Opinion
01 Cr. 1059 (SAS)
April 12, 2002
David B. Anders, Assistant United States Attorney, United States Attorney's Office, for the Government.
James R. DeVita, Esq., Bryan Cave LIP, for Defendant.
OPINION AND ORDER
On November 8, 2001, Joseph F. Doody, IV was indicted by a grand jury sitting in the Southern District of New York. The government now moves pursuant to Rule 48(a) of the Federal Rules of Criminal Procedure to dismiss the Indictment without prejudice and defendant objects. For the reasons stated below, the government's motion is granted.
I. BACKGROUND
The Indictment charges defendant with six counts of insider trading.See Indictment at 5-6. These charges stem from defendant's purchase of securities in BetzDearborn, Inc. ("Betz"), a Pennsylvania corporation.See id. ¶ 2. The Indictment charges, in substance, that defendant obtained confidential, material, nonpublic information from his girlfriend, who was an executive secretary at Betz, regarding the impending merger between Betz and Hercules Incorporated ("Hercules").See id. ¶¶ 7, 8. Defendant allegedly used that information to purchase Betz securities as well as options to purchase Betz securities. See id. ¶ 9. on July 30, 1998, following public announcement of the Betz-Hercules merger, defendant allegedly sold all of his Betz securities and obtained an illegal net profit of approximately $239,967. See id. ¶ 10.
In the Indictment presented to the grand jury, the government represented that venue was proper in the Southern District of New York for two reasons. First, because "Betz common stock traded on the New York Stock Exchange ("NYSE")," the government believed "there was ample probable cause to conclude that defendant's purchase and sales of Betz occurred in this District." 3/5/02 Letter From ATJSA David B. Anders to the Court ("Gov't 3/5/02 Ltr."), Ex. C to Deposition of James R. DeVita, counsel for defendant ("DeVita Dep.") at 1-2 (citing Indictment ¶ 2). Second, "the transfer agent for Betz was located in New York, New York." Id. at 2 (citing Indictment ¶ 9).
At a conference before this Court on November 13, 2001, defense counsel stated that he might move to transfer venue "because everything took place in Philadelphia." 11/13/01 Transcripts attached to 4/9/02 Letter From AUSA Anders to the Court ("Gov't 4/9/02 Ltr."), at 5. At that conference, the Court set a motion schedule, see id. at 7, but defense counsel never made such a motion, see Gov't 3/5/02 Ltr. at 2. The Courtalso set a trial date of March 18, 2002. See 11/13/01 Transcript at 7.
In late February, while preparing for trial, the government learned that defendant's transactions were effected entirely through the Pacific Coast Stock Exchange ("PCSE") through a routing system at the Pershing Division of DLJ, the clearing house for DLJ Direct. See Gov't 3/5/02 Ltr. at 2. This system provides an alternative market center for trading stocks that are listed on the NYSE. See id. Based on this new information, the government concluded that there were insufficient facts to support venue in this District. See id.; see also 2/28/02 Letter from AUSA Anders to the Court ("Gov't 2/28/02 Ltr."), Ex. A to DeVita Dep., at 1.
On or about February 26, 2002, the government advised defense counsel of the facts it had learned regarding venue and asked if defendant would waive venue in this District or would prefer that the government seek a new indictment in the Eastern District of Pennsylvania. See Gov't 3/5/02 Ltr. at 2. On February 27, 2002, defense counsel informed the government that defendant would not waive venue and would not consent to a transfer to the Eastern District of Pennsylvania. See id. The next day, the government advised the Court that it planned to seek dismissal of the Indictment because of the venue issue. See Gov't 2/28/02 Ltr. at 1.
On March 1, 2002, defense counsel submitted a letter to the Court stating its objections to the government's intent to dismiss the case and re-indict defendant in the Eastern District of Pennsylvania. See 3/1/02 Letter from DeVita to the Court ("Def. 3/1/02 Ltr."). In that letter, defendant requested that the Court either "dismiss the indictment with prejudice pursuant to Rule 48(b)" or "await the government's motion pursuant to Rule 48(a) and . . . grant it, with prejudice." Id. (emphasis in original). The Government responded in a letter dated March 5, 2002,see Gov't 3/5/02 Ltr., and a conference was held on March 14, 2002. In response to the Court's request at that conference, the parties submitted additional briefing on the issues raised in defendant's March 1st letter. See Defendant's Memorandum of Law in Opposition to Government's Motion for an Order of Nolle Prosegui ("Def. Opp."); Gov't 4/9/02 Ltr.
II. LEGAL STANDARD
Rule 48(a) provides, in pertinent part:
The Attorney General or the United States attorney may by leave of court file a dismissal of an indictment, information or complaint and the prosecution shall thereupon terminate. Such a dismissal may not be filed during the trial without the consent of the defendant.
Fed.R.Crim.P. 48(a). Although the Rule requires "leave of the court," a "court is generally required to grant a prosecutor's Rule 48(a) motion unless dismissal is `clearly contrary to manifest public interest.'"U.S. v. Pimentel, 932 F.2d 1029, 1033 (2d Cir. 1991) (quoting United States v. Cowan, 524 F.2d 504, 513 (5th Cir. 1975)). The rationale behind this general rule is that the "Executive remains the absolute judge of whether a prosecution should be initiated and the first and presumptively the best judge of whether a pending prosecution should be terminated." Cowan, 524 F.2d at 513; see also United States v. Hayden, 860 F.2d 1483, 1487 (9th Cir. 1988) ("While the judiciary has been authorized to supervise prosecutorial decisions to dismiss, Rule 48(a) was not enacted for the purpose of usurping the traditional role of the prosecutor to determine whether to terminate a pending proceeding.").
Because the Second Circuit has had no opportunity to analyze the scope and discretion afforded by Rule 48(a), courts in this district have relied heavily on the holdings of other Circuits, particularly the Fifth Circuit which has written more extensively on the subject than any other court. See United States v. Rosenberg, 108 F. Supp.2d 191, 202 n. 15, 204 (S.D.N Y 2000).
Dismissal pursuant to Rule 48(a) is generally without prejudice. See United States v. Ortega-Alvarez, 506 F.2d 455, 458 (2d Cir. 1974);see also DeMarrias v. United States, 487 F.2d 19, 21 (8th Cir. 1973);United States v. Chase, 372 F.2d 453, 463-464 (4th Cir. 1967); Wright Miller, Fed. Prac. Proc. Crim. 2d § 811. Courts dismiss cases under Rule 48(a) with prejudice or deny such motions only where the prosecutor acted in "bad faith," United States v. Smith, 55 F.3d 157, 159 (5th Cir. 1995); Rosenberg, 108 F. Supp. 2d at 204, or where dismissal followed by recharge would amount to "prosecutorial harassment," United States v. Salinas, 693 F.2d 348 (5th Cir. 1982); Rosenberg, 108 F. Supp. 2d at 204; see also United Staes v. Greater Blouse, Skirt Neckwaear Contractors Assoc., 228 F. Supp. 483, 487 (S.D.N.Y. 1964). In determining whether either of these factors are present, there is a "presumption of good faith on the part of the prosecutor." Rosenberg, 108 F. Supp. 2d at 207; see also United States v. Reyes, 102 F.3d 1361, 1367 (5th Cir. 1996); United States v. Matta, 937 F.2d 567, 568 (11th Cir. 1991);Greater Blouse, 228 F. Supp. at 486.
"In fact, "it is precisely because a dismissal under Rule 48(a) does not bar a subsequent prosecution that the rule requires the consent of the court.'" Rosenberg, 108 F. Supp. at 207 (quoting United States v. Davis, 487 F.2d 112, 118 (5th Cir. 1973)).
III. DISCUSSION
Defendant contends that the government has acted improperly because it "disregarded the defendant's constitutional rights in commencing this action where it clearly did not belong" and "misled the grand jury into alleging that the crimes charged in the Indictment were committed [in this District]." Def. Opp. at 3. He insists that the government now seeks "to avoid the consequences" of that improper action by asking this Court to dismiss the Indictment without prejudice. Id. at 1. According to defendant, the only way to hold the government accountable for its actions and "vindicate" defendant's rights is for the Court to either dismiss the Indictment with prejudice or order the government to proceed to trial. Id. at 1, 6-7. Defendant's arguments are unavailing.
First, contrary to defendant's contention, the government's actions inbringing the Indictment are irrelevant to a Rule 48(a) motion. "The salient issue . . . is not whether the decision to maintain the federal prosecution was made in bad faith but rather whether the Government's later efforts to terminate the prosecution were similarly tainted with impropriety." Rinaldi v. United States, 434 U.S. 22, 30 (1977); see also Rosenberg, 108 F. Supp. 2d at 203. Defendant has provided no evidence of bad faith on the part of the government at the time it sought leave to dismiss the Indictment. The government explained that, whereas it originally believed that venue lay in this District, further investigation revealed that the Eastern District of Pennsylvania was the more appropriate venue. It is "the duty of the [government] to determine in which jurisdiction the offense charged "was most probably committed, and bring the offender to trial there.'" United States v. Bryson, 16 F.R.D. 453, 453 (S.D. Cal. 1953) (quoting Hass v. Henkel, 216 U.S. 462 (1910)). Its determination that the Eastern District of Pennsylvania, rather than this District, is the proper venue appears to be based on a good reason, i.e. that the alleged offense was committed in Pennsylvania, not here. Defendant has presented no evidence to the contrary, and it is not this Court's role to "substitute its judgment for the prosecutor's determination or second guess the prosecutor's evaluation." Salinas, 693 F.2d at 251.
Second, even if the government's actions in bringing the Indictment were relevant, there is no evidence of bad faith on the part of the government at that time. Defendant argues that the government should be held accountable for its recklessness" in "not accurately informing the grand jury of the facts relating to venue." Def. Opp. at 4. According to defendant, the government "was aware that the trades covered by five of the six counts of the Indictment took place on the Pacific Stock Exchange" because the Indictment "specifically alleges that `Betz options were traded on the Pacific Stock Exchange'." Id. (quoting Indictment ¶ 2). In addition, defendant argues that the government was in possession of the brokerage firm confirmations for the trades covered by Count One of the Indictment and "[t][he fact that the government did not understand the confirmation[s] does not excuse it of its responsibility for misleading the grand jury" with regard to those trades. Id.
As defendant admits, "the government did not intentionally mislead the grand jury." Id. (emphasis in original). There is no evidence, and defendant does not even contend, that any of the facts relating to venue in the Indictment are inaccurate — apparently Betz securities are traded on the NYSE and Betz's transfer agent is located in New York, New York. See Gov't 3/5/02 Ltr. at 3. Defendant's claim that it was "readily apparent" from the brokerage firm confirmations that venue did not lie in New York is simply wrong. The confirmations do not indicate that the transactions occurred on the PCSE rather than the NYSE, and they do not indicate anything regarding the activities of the transfer agent. See Confirmations, Ex. D to DeVita Dep. Even if defendant is correct that the government could have learned more about defendant's trades prior to bringing the Indictment, the Court cannot say that inadequate investigation equates to bad faith. Cf. United States v. Goodson, 204 F.3d 508, 512 (4th Cir. 2000) (holding that prosecutor's failure to comply with court's schedule by securing the presence of witnesses did not equate to bad faith).
Third, there is no evidence of prosecutorial harassment. "The key factor in a determination of prosecutorial harassment is the propriety or impropriety of the Government's effort to terminate the prosecution — the good faith or lack of good faith of the Government in moving to dismiss." Salinas, 693 F.2d at 351. As noted above, there is no indication that the government has acted in bad faith. Dismissal followed by renewed prosecution, in and of itself, is not an indication of prosecutorial harassment. See Rosenberg, 108 F. Supp. 2d at 205.
Fourth, the government has not created the kind of unnecessary delay in bringing a defendant to trial" that warrants Rule 48(b) dismissal with prejudice. Fed.R.Crim.P. 48(b). Defendant argues that the government's action "has caused a permanent delay of the trial on this Indictment." Def. Opp. at 3. He is wrong. The government is seeking dismissal of this Indictment, not delay in the trial of this Indictment. Moreover, the government has represented to the Court that a Grand Jury in the Eastern District of Pennsylvania has already returned an indictment against defendant and the trial date has been set for June 3, 2002, just a month and a half after the trial date scheduled by this Court. See Gov't 4/9/02 Ltr. at 7. Thus, the government's motion has not significantly delayed defendant's trial.
Finally, there is no reason why the Court should order the government to proceed to trial. Defendant insists that the government should be compelled to try the venue issue because, in a parallel civil action against defendant, it has taken the position that venue is proper in this District. However, his reference to that action is inapposite. In the parallel civil action, defendant moved to dismiss the action on the ground of improper venue. See Order of Judge Lewis A. Kaplan in Securities and Exchange Comm'n v. Joseph F. Doody, IV, et al., 01 Civ. 9879 (LAK), Ex. F to DeVita Dep., at 1. That Court found that the allegations in the complaint were sufficient to establish venue and that "the Court would benefit" from further "factual development" before deciding the issue on its merits. Id. at 1-2. Accordingly, the Court denied defendant's motion but noted that "if this is not the proper district, the Court . . . would transfer it to a proper one . . . ." Id. at 2. Thus, this holding provides no basis for forcing the government to proceed with this criminal trial in a district where it has a good faith belief that there is no basis for venue.
In sum, defendant has produced no evidence that the government's Rule 48(a) motion was made in "bad faith" or is intended to harass the defendant. Accordingly, the government's motion is granted and the Indictment is dismissed without prejudice. See Bryson, 16 F.R.D. at 453 (granting government's Rule 48(a) motion where government believed that venue was not proper in that district and an indictment charging the same offense against the defendant was pending in district where government believed venue was proper)