Opinion
No. 00 Cr. 91 (RWS).
February 6, 2001.
HONORABLE MARY JO WHITE, United States Attorney for the Southern District of New York, Attorney for United States of America. By: STEVEN G. KOBRE, Assistant US Attorney, MEI LIN KWAN-GETT, Assistant US Attorney Of Counsel New York, NY.
LAWRENCE K. FEITELL, ESQ., Attorney for Defendant New York, NY.
OPINION
Defendant Dennis Rueb ("Rueb") seeks an order suppressing evidence, pursuant to the Fourth Amendment, directing the government to provide a bill of particulars, pursuant to Federal Rule of Criminal Procedure 7(f), directing the government to provide certain discovery required by Federal Rule of Criminal Procedure 16, directing the government to provide immediate notice of its intention to offer evidence of other crimes, wrongs, or act, pursuant to Federal Rule of Evidence 404(b), directing the immediate production of Brady and Giglio materials, and directing the government to provide a list of witnesses it intends to call at trial at least one month before trial.
For the reasons set forth below, the motions are denied in part and granted in part. Prior Proceedings
Defendants Charles DiStefano ("DiStefano") and John Massaro ("Massaro") have joined in motions made by other defendants in this case, to the extent applicable. The determinations reached herein apply to DiStefano and Massaro as well.
On February 9, 2000, the indictment in this case issued charging Rueb and twenty other securities brokers with one count of conspiracy to commit securities, mail, and wire fraud, and five counts of securities fraud.
Rueb was arraigned on February 17, 2000. The instant motions were filed on November 27 and 30, 2000, Opposition was received, and the matter was marked fully submitted on January 17, 2001.
Facts
According to the indictment, Rueb and his co-defendants were formerly employed as registered representatives at Sterling Foster Co. ("Sterling Foster"), a now-defunct broker dealer which formerly had its offices in Melville, New York. Rueb and his co-defendants are charged with fraud in connection with the sale of securities to public customers relating to six public offerings and/or aftermarket trading in the securities of six corporations (the "House Stocks"). Allegedly, as a result of various fraudulent sales practices of Rueb and his co-defendants, Sterling Foster drove the price of the House Stocks in the immediate aftermarket from the offering price to at least twice that amount. Shortly thereafter, the value of the House Stocks experienced a sharp decline. Sterling Foster's clients were prevented from selling those stocks and, consequently, incurred millions of dollars in losses.
The indictment details the following fraudulent techniques allegedly employed by Rueb and his co-defendants: (a) providing and receiving excessively high compensation, which was not disclosed to customers, (b) using high-pressure tactics to induce customers to buy House Stocks, (c) opening customers' accounts with well-established non-House Stocks and then switching the customers to House Stocks, (d) making unauthorized purchases of House Stocks in customers' accounts, (e) making false and misleading statements to persuade customers not to see House Stocks, (f) failing to take and execute customers orders to sell House Stocks, and (g) executing a sale of a House Stock only if it could be paired with a purchase of the same stock by another customer.
The indictment provides specific instances of the aforementioned techniques, including instances when exorbitant commissions were paid and specific types of misrepresentations and omissions used to convince customers to purchase House Stocks. The indictment also specifies some of the precise means and methods by which Rueb and his co-defendants allegedly conspired to violate the securities laws, namely, by engaging in manipulative and deceptive acts in connection with the sales of securities, pre-selling shares of secondary market House Stocks prior to effective dates of the public offerings, and persuading customers not to sell shares of House Stock or refusing to execute sale orders for such securities. The indictment also describes four instances on which Rueb purchased stock without his customers' authorization, including the specific dates, amount of stock, prices, and names of the securities.
On February 12, 1997, a search warrant issued in the Eastern District of New York for the business premises of Sterling Foster located in Melville, New York. The warrant was based upon facts set forth in an affidavit sworn to by Federal Bureau of Investigation ("FBI") Special Agent Henry Gittleman (the "Gittleman Affidavit"). Agents of the FBI and the United States Postal Service executed the warrant on February 13, 1997.
The Gittleman Affidavit describes the results of a long-term investigation into repeated acts of alleged fraudulent and manipulative practices on behalf of Sterling Foster in connection with six public offerings and secondary offerings underwritten by Sterling Foster and another firm, Patterson Travis. The affidavit discusses the details of the "boiler-room" sales operation which was "[a]t the heart of the [fraudulent] scheme." The facts set forth in the affidavit are based upon, among other sources, (1) letters, documents, survey responses, and interviews of numerous customers of Sterling Foster gathered by the SEC and the National Association of Securities Dealers ("NASD"), (2) transcripts of interviews conducted by the NASD of various past and present registered representatives of Sterling Foster, customers of Sterling Foster, and individuals associated with the issuers in question, and (3) interviews with investigators and lawyers from the SEC and NASD.
The affidavit enumerates many of the same sales practice violations that are addressed in the indictment, including the brokers' use of scripts and misrepresentations to sell stock. The search warrant issued by the magistrate judge ordered the seizure of a wide array of documents relative to the fraudulent sales practices, including documents regarding broker compensation, broker discipline, trades of House Stocks, and opening account information.
Among the items seized on February 13, 1997, were papers, files, books, and records located in Rueb's desk at Sterling Foster.
The government has provided extensive discovery, including records relating to the public offerings of the House Stocks, blue sheets on CD Rom of every trade involving the House Stocks along with a chart so each transaction can be separated by broker, and documents compiled by the NASD and SEC in their investigations of Sterling Foster and its brokers, as well as tapes and transcripts of Rueb speaking with customers, account statements and other documents relating to specific instances of alleged wrongful conduct by Rueb, access to tapes and transcripts of interactions between Rueb's co-defendants and their clients, and Rueb's deposition testimony before the SEC in connection with the matters that are now the subject of this criminal action. The government has provided inventories with almost every set of materials disclosed. Rueb has also been served by the NASD Regulation, Inc. with correspondence identifying complaints filed with that organization against Rueb by named victims.
Rueb's counsel represents without contradiction that some discovery materials are located at the office of counsel for one of the defendants, some are at a copy shop designated by the government, and the majority are in a storage facility in Melville, New York.
Discussion I. The Motion To Suppress
Rueb seeks to suppress the evidence seized from his desk at Sterling Foster, and the immediate return of those items. Although Rueb's motion is not entirely clear on this point, he appears to make two arguments: one, that the search warrant was not based upon probable cause; and, two, that the items seized were not within the scope of the warrant, because they included what he calls "personal property," i.e., his commission runs, his "book" or list of customers, notes concerning certain stocks, trading logs, and papers from his attorney relating to conferences and preparation for an inquiry and hearing before the NASD.
To assess whether probable cause supported the issuance of a search warrant, the court must consider whether, tested in a realistic and common sense manner, the supporting affidavit made two factual showings: (1) that a crime was committed and (2) that there is probable cause to believe that evidence of that crime was located at the premises. See United States v. Ventresca, 380 U.S. 102, 108 (1965); United States v. Travisano, 724 F.2d 341, 345 (2d Cir. 1983)
A district court should accord substantial deference to the magistrate's finding of probable cause, and, "[a]lthough in a particular case it may not be easy to determine when an affidavit demonstrates the existence of probable cause, the resolution of doubtful or marginal cases in this area should be largely determined by the preference to be accorded to warrants." Ventresca, 380 U.S. at 109; see also Rivera v. United States, 928 F.2d 592, 602 (2d Cir. 1991). The duty of a reviewing court is simply to ensure that the magistrate had a "'substantial basis for conclud[ing]'" that probable cause existed based on "the totality of the circumstances." Illinois v. Gates, 462 U.S. 213, 236, 238 (1983) (quoting Jones v. United States, 362 U.S. 257, 271 (1960)).
The Gittleman Affidavit provides a detailed description of conduct on behalf of both principals and brokers of Sterling Foster in violation of a litany of securities laws, articulates specific bases for believing the relevant records would be maintained at Sterling Foster's business premises, and identifies categories of records that are directly related to the scheme under investigation. Indeed, the Gittleman Affidavit describes facts supporting the conclusion that Sterling Foster was "permeated with fraud . . . [and therefore] the agents could properly seize all business records." National City Trading Corp. v. United States, 635 F.2d 1020, 1026 (2d Cir. 1980). Therefore, the magistrate had a substantial basis for the finding of probable cause and issuance of the search warrant.
As for the contention that the documents seized were "personal property" and, thus, outside of the warrant's scope, to the contrary, the documents identified by Rueb are precisely the type of records that are the subject of the warrant.
Finally, Rueb has not identified any documents that are subject to the attorney-client privilege, although he has been afforded the opportunity to inspect all documents taken from the area where he worked. The government represents that if there are documents subject to the privilege, then the government would not seek to use such documents at trial. The court accepts this representation.
Therefore, the items seized from Rueb's desk will not be suppressed. In addition, as these items are evidence in the case, Rueb is not entitled to their return. See Fed.R.Crim.P. 41(e).
II. Motion For A Bill of Particulars
Rueb moves pursuant to Federal Rule of Criminal Procedure 7(f) for production of a bill of particulars by the government. "Rule 7(f) . . . permits the defendant to seek a bill of particulars in order to identify with sufficient Particularity the nature of the charge pending against him, thereby enabling [the] defendant to prepare for trial, to prevent surprise, and to interpose a plea of double jeopardy should he be prosecuted a second time for the same offense." United States v. Bortnovsky, 820 F.2d 572, 574 (2d Cir. 1987)
In order to obtain a bill of particulars, the defendant must show that the charges of the indictment are so general that they do not advise him of the specific acts of which he is accused. See United States v. Torres, 901 F.2d 205, 234 (2d Cir. 1990); United States v. Henry, 861 F. Supp. 1190, 1197 (S.D.N.Y. 1994) The standard applied to the information sought is not whether it is helpful to the defense, but whether it is necessary. See United States v. Love, 859 F. Supp. 725, 738 (S.D.N.Y. 1994); Henry, 861 F. Supp. at 1197. A bill of particulars is not required where the information sought has been made available in alternative forms. See United States v. Kelly, 91 F. Supp.2d 580, 583-84 (S.D.N Y 2000) (citations omitted)
A bill of particulars will not be issued if it would "force the Government to particularize all of its evidence." Henry, 861 F. Supp. at 1197 (quoting United States v. Cephas, 937 F.2d 816, 823 (2d Cir. 1991)). Nor will a defendant be permitted to use such a request to compel the government to disclose the manner in which it will prove the charges or preview its evidence or legal theory. See United States v. Perez, 940 F. Supp. 540, 550 (S.D.N.Y. 1996) (citations omitted); United States v. Facciolo, 753 F. Supp. 449, 451 (S.D.N.Y. 1990), aff'd, 968 F.2d 242 (2d Cir. 1992).
Finally, the decision to grant or deny a defendant's request for a bill of particulars is within the sound discretion of the trial court. See Perez, 940 F. Supp. at 550 (citations omitted).
Rueb seeks "particulars" concerning a broad array of the details of potential trial evidence including, among other things, a comprehensive list of each and every false or misleading written or oral statement made by him that the government will prove at trial, the dates such statements were made, the names of each and every participant, and the basis that every statement was false or misleading.
The indictment contains a wealth of evidentiary detail about when and how Rueb and his co-defendants allegedly perpetrated the scheme to mislead investors with respect to the sale of six House Stocks. This detail includes inter alia descriptions of the allegedly fraudulent techniques employed, specific omissions and misrepresentations of Rueb and his co-defendants, specific instances of wrongful conduct, with information regarding the dates, amounts, and prices of the purchases involved, and the names of a number of potential victims. In addition, the government has provided extensive discovery which further serves to put Rueb on notice of the specific acts of which he is accused.
Essentially, Rueb seeks an itemized preview of the government's proof to which he is not entitled. See, e.g., United States v. Shoher, 555 F. Supp. 346, 350 (S.D.N.Y. 1983) (defendant in mail and wire fraud case not entitled to bill of particulars "detail[ing] each of the [false and fraudulent] representations allegedly made to unsuspecting investors") (internal quotations marks and citation omitted).
Finally, Rueb's contention that he is unfairly impeded in discerning with sufficient particularity the nature of the charges against him due to the volume of discovery materials is not supported. The government has provided inventories with almost every set of materials disclosed.
Therefore, the requirements of Rule 7(f) have been met, and Rueb is not entitled to a bill of particulars.
III. The Motion For Rule 16 Discovery
Rueb seeks disclosure of the following materials, pursuant to Rule 16(f): copies of the tape recordings of Rueb's conversations with customers; reports or synopses thereof of an interview by the government with Rueb; a copy of his criminal record; the materials taken from his work area; and disclosure of expert testimony to be offered by the government sixty days prior to trial. See Fed.R.Crim.P. 16(f); Fed.R.Evid. 702, 703, 705.
The government represents without contradiction that it has already provided many of the materials sought. More specifically, the government has made available both tapes and transcripts of Rueb's conversations with customers, and the transcript of Rueb's SEC deposition (the "interview" referenced by Rueb), provided Rueb's criminal record, made available for inspection the materials taken from Rueb's work area and offered assistance in finding those items from among the discovery materials. To the extent that the government has already provided the materials requested, the motion is denied as moot.
The government objects that Rueb is not entitled to the government's notes or summaries of that proceeding. However, the authority cited by the government is an unpublished disposition from the Fourth Circuit which, while not prohibited by the applicable Fourth Circuit itself, is "disfavored" at least within that circuit. U.S.Ct. App. 4th Cir. Rule 36(c). Nonetheless, Rueb has failed to offer authority in support of his contention that he is entitled to such materials. Therefore, the motion is denied in this regard as well.
With respect to those materials not provided, the government has represented that if expert testimony is proffered the necessary information will be provided in a timely fashion.
IV. The Motion For Rule 404(b) Notice
Rueb seeks immediate disclosure of all other crimes, wrongs, or acts that the government intends to introduce at trial, pursuant to Federal Rule of Evidence 404(b). Rule 404(b) requires that the government provide "reasonable notice in advance of trial, or during trial if the court excuses pretrial notice on good cause shown, of the general nature of any such evidence it intends to introduce at trial." Fed.R.Evid. 404(b).
This Court has previously approved Rule 404(b) disclosure two weeks before trial as reasonable. See United States v. Jaillal, 00 Cr. 69, 2000 WL 1368055, at *6 (S.D.N.Y. Sept. 20, 2000); United States v. Kelly, 91 F. Supp.2d 580, 584 (S.D.N Y 2000). The government objects that such an order is unnecessary, and represents that it will provide such notice "well in advance of trial," but without specifying a time frame. The government also notes that notice afforded more than ten working days before trial has consistently been deemed by courts in this circuit as reasonable" within the meaning of Rule 404(b). See, e.g., United States v. Richardson, 837 F. Supp. 570, 575 (S.D.N.Y. 1993)
Rueb's motion is granted insofar as the government is directed to give notice of its Rule 404(b) evidence at least ten working days before trial. The government may provide notice during trial in the event new 404(b) evidence arises and good cause has been shown for the lack of pretrial notice.
V. The Motion For Giglio And Brady Material
Rueb seeks immediate disclosure of exculpatory evidence or material pursuant to Brady v. Maryland, 373 U.S. 83 (1963). The government responds that it is aware of its continuing disclosure obligations under Brady. Courts in this circuit have repeatedly denied pretrial requests for discovery orders pursuant to Brady where the government has made a good-faith representation to the Court and defense counsel that it recognizes and will comply with its disclosure obligations under Brady.See, e.g., Perez, 940 F. Supp. at 553; United States v. Schwimmer, 649 F. Supp. 544, 549 (E.D.N.Y. 1986). Rueb offers no reason to believe that the government will not comply with those obligations. Therefore, the Court accepts the government's representation.
Rueb also seeks disclosure of Giglio material, i.e., Brady material of an impeachment nature, at least 30 days before trial. See Giglio v. United States, 405 U.S. 150 (1972). Brady establishes no general right of pretrial discovery and gives rise to no pretrial remedies. See Weatherford v. Bursey, 429 U.S. 545, 559 (1977); United States v. Evanchik, 413 F.2d 950, 953 (2d Cir. 1969); Perez, 940 F. Supp. at 553. "NeitherBrady nor any other case . . . requires that disclosures under Brady must be made before trial." United States ex rel. Lucas v. Regan, 503 F.2d 1, 3 n. 1 (2d Cir. 1974); United States V. Matos-Peralta, 691 F. Supp. 780, 790-91 (S.D.N.Y. 1988)
Due process requires only that a defendant receive such information before it is too late for him to make beneficial use of it at trial.United States v. Olson, 697 F.2d 273, 275 (8th Cir. 1983); United States v. Shoher, 555 F. Supp. 346, 352 (S.D.N Y 1983) (accused to receive Brady material in time "to permit effective 'evaluation, preparation, and presentation at trial'") (citation omitted). Accordingly, Brady "impeachment" information is properly disclosed when the witness is called to testify at trial. See Kelly, 91 F. Supp.2d at 585 (citations omitted)
The usual practice in this district has been that the government has agreed to make impeachment information available to the defense at the same time as Jencks Act material, that is, at least one day before the government witness is called to testify. See United States v. Jailall, No. 00 Cr. 69, 2000 WL 1368055, at *6 (S.D.N.Y. Sept. 20, 2000); Kelly, 91 F. Supp.2d at 585; See also United States v. Gutierrez-Flores, No. 94 Cr. 393, 1994 WL 558034, at *3 (S.D.N.Y. Oct. 11, 1994) (approving government's proposal to make Giglio disclosure one day before witness called to testify). This practice allows defense counsel adequate time to prepare for cross-examination of government witnesses as they testify at trial. Therefore, the government is directed to provide Giglio material at least one day before calling the relevant witness to testify.
VI. The Motion For A Witness List
Rueb seeks disclosure of a list of the government's witnesses at least one month before trial. A district court has discretion to compel pretrial disclosure of the government's witnesses, but should grant such a request only if the defendant makes "a specific showing that disclosure [is] both material to the preparation of his defense and reasonable in light of the circumstances surrounding his case." Cannone, 528 F.2d at 300-01. Thus, the burden is on the defendant to make "some particularized showing of need," United States v. Wilson, 565 F. Supp. 1416, 1438 (S.D.N.Y. 1983) (internal quotation marks and citation omitted), which need "should be balanced against the possible dangers accompanying disclosure (i.e. subornation of perjury, witness intimidation, and injury to witnesses)," United States v. Cafaro, 480 F. Supp. 511, 520 (S.D.N.Y. 1979) (quoting Cannone, 528 F.2d at 302.
In considering whether to order disclosure of the government's list of witnesses, courts in this district have frequently looked to the factors set out in United States v. Turkish:
(1) Did the offense alleged in the indictment involve a crime of violence?
(2) Have the defendants been arrested or convicted for crimes involving violence?
(3) Will the evidence in the case largely consist of testimony relating to documents (which by their nature are not easily altered)?
(4) Is there a realistic possibility that supplying the witnesses' names prior to trial will increase the likelihood that the prosecution's witnesses will not appear at trial, or will be unwilling to testify at trial?
(5) Does the indictment allege offenses occurring over an extended period of time, making preparation of the defendants' defense complex and difficult?
(6) Do the defendants have limited funds with which to investigate and prepare their defense?458 F. Supp. 874, 881 (S.D.N.Y. 1978).
The offenses alleged in the indictment do not involve a crime of violence. In addition, Rueb represents without contradiction that he has never been arrested for or convicted of a crime of violence.
As for the evidence in the case, the government contends that the trial "generally will involve testimony by victims and co-conspirators," rather than documentary evidence. However, given the nature of the offenses charged, as well as the volume of documents produced in discovery, it is apparent that documentary evidence — which by its nature cannot be easily altered — will also be quite important. Thus, contrary to the government's position, Rueb's reliance on United States v. Nachamie in this regard is not entirely misplaced. See 91 F. Supp.2d 565, 578 (S.D.N.Y. 2000) (ordering witness disclosure in Medicare fraud case in part because of volume and importance of documentary evidence) see also United States v. Shoher, 555 F. Supp. 346, 354 (S.D.N Y 1983) (nature of mail and wire fraud case suggested testimony would "relate, in large part, to documentary evidence"); Turkish, 458 F. Supp. at 881 (identification by government of 25, 000 documents relating to case showed that "bulk of evidence [would] likely involve documents). Adequate preparation for trial, including for witness cross-examination, will require investigation and review of the documentary evidence. See United States v. Rosenthal, No. 91 Cr. 412, 1991 WL 267767, at *4 (S.D.N.Y. Dec. 3. 1991) (ordering disclosure in part because adequate preparation for witness cross-examination in complex white-collar prosecution required review of voluminous documentary evidence).
The government points out that it has provided inventories of the documentary materials disclosed and contends, therefore, that Rueb's claims about difficulties sorting through those materials are baseless. The government also points out that Rueb already has access to materials identifying at least some potential complainants and, indeed, that in meetings between the government and Rueb's counsel, at which Rueb has been present, names of victims have been discussed. However, even with the inventories, it is apparent that a substantial amount of time and effort will be required to review the materials adequately. Rueb is represented by court-appointed counsel, so that there are limited resources which can be devoted to this task. See United States v. Upton, 856 F. Supp. 727, 733, 750-01 (E.D.N.Y. 1994) (fact that all but one of dozen defendants had appointed counsel supported disclosure); Shoher, 555 F. Supp. at 354 (although one movant had retained counsel, fact that three of four defendants had appointed counsel weighed in favor of disclosure). The fact that the discovery materials are located in three different locations, i.e., the office of one defense counsel, a government-designated copy shop, and a main storage facility in Melville, New York, further adds to the difficulty. And, although Rueb already knows of some potential complainants, the pool of possible witnesses is large. See Rosenthal, 1991 WL 267767, at *4.
A number of Rueb's co-defendants also have court-appointed counsel, although the Court is not presently aware of the exact number for whom this is the case. Cf. Nachamie, 91 F. Supp.2d at 579-80 (although majority of defendants in multi-defendant case:had retained counsel, this did not mean "they possess[ed] unlimited funds to cope with voluminous pretrial discovery," and court noted one defendant had recently replaced retained counsel with appointed counsel)
The offenses charged in the indictment spanned a period of approximately three years, which is an extended period of time. See United States v. Shoher, 555 F. Supp. 346, 354 (S.D.N.Y. 1983) (mail and wire fraud taking place over seventeen-month period); Turkish, 458 F. Supp. at 881 (tax fraud taking place over fifteen-month period). Moreover, Rueb was employed by Sterling Foster for close to the entire period at issue, so that he necessarily was involved in a large number of transactions.
The government avers that the victims in this case should be free from further harassment over the telephone, given that the crimes alleged occurred over the telephone and often involved aggressive conduct on behalf of the defendants. Although Rueb has stated that he seeks a witness list in order to better investigate the documentary evidence, he has not represented that he will not attempt to communicate with witnesses. Nonetheless, the government's concern falls short of "a realistic possibility that supplying the witnesses' names . . . will increase the likelihood that . . . [they] will not appear at trial, or will be unwilling to testify." Turkish, 458 F. Supp. at 881. Moreover, to the extent any communications with witnesses are attempted, only defense counsel may make such attempt. See id. at 581 n. 1 (noting in favor of disclosure that, "[a]s an extra precaution, [the] defendant . . represents that only defense counsel, not defendant himself, will communicate with the witnesses").
In the cases relied upon by the government, disclosure was denied because the defendant had done no more than make "an abstract, conclusory claim that such disclosure was necessary." United States v. Cannone, 528 F.2d 296, 301-01 (2d Cir. 1975) Rueb, however, has met his burden to show a particularized need that outweighs the possible dangers of disclosure. Therefore, the government is directed to provide a list of the witnesses it intends to call at trial at least 30 days prior to trial, and is further directed to update this list as required.
Finally, the government has not addressed the issue of whether disclosure, if granted, should be limited at this juncture to Rueb. In Nachamie, only one of eight defendants moved for disclosure of the witness list but the court ordered disclosure to each defendant. See 91 F. Supp.2d at 579-80. In Shoher and Turkish, some of the multiple defendants moved for disclosure and the court's order was not expressly limited to those defendants. See Shoher, 555 F. Supp. at 353-54;Turkish, 458 F. Supp. at 876, 880-882. The reason may well be because of the impracticalities and potential for unfairness involved in any other result, even though some of the relevant factors might vary from one defendant to another — most notably, whether a particular individual has a history of violent crime. Therefore, the government is ordered to provide the witness list to each defendant. However, if the government has an objection with respect to a particular defendant, and a proposal for selective disclosure, the court will consider such objection prior to the time directed for disclosure.
Conclusion
Therefore, for the reasons set forth above, the motions are denied in part and granted in part.
It is so ordered.