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United States v. DiScala

Mar 19, 2018
14-cr-399 (ENV) (E.D.N.Y. Mar. 19, 2018)


14-cr-399 (ENV)




Jury selection in this case is scheduled to start on April 3, 2018. The government and defendant Kyleen Cane have filed evidentiary motions in limine. Dkt. Nos. 399, 426, 441, 461, 479, & 491. Having considered the submissions of the parties, Dkt. Nos. 413, 419, 436, 443, 450, 452, 460, 462, 467, 482, 491, 500, 524, & 527, and argument having been heard, the motions in limine are resolved in the manner and for the reasons as set forth below.

Defendant DiScala subsequently served and filed an in limine motion of his own, which was sub judice at the time of this decision.

For the reasons set forth at the status conference on March 9, 2018, the trial of defendant Michael Morris was severed from the trial beginning April 3, 2018. In any subsequent trial involving Morris, the Court will hear argument seeking modification of these rulings for issues of prejudice peculiar to him.

1. First Government Motion in Limine



(A) The government's motion,pursuant to Federal Rules ofEvidence 401-403, or in thealternative, 404(b), to admitevidence of a prior businessrelationship between AbraxasDiScala and Kyleen Cane.

(A) First up, to the extent that the defense oppositionsreiterated their then pending motions to suppress, thenthose arguments are now academic. The rulings thatfollow, therefore, apply only to documents or things thatsurvived suppression and to the anticipated testimony ofwitnesses.Neither Cane or DiScala appear to contest theadmissibility of evidence, generally, which relates totheir prior dealings. As such, any evidence of theirdealings are admissible, except as to dealings relating toRegenicin, to show how they came to be involved witheach other and to join in the alleged conspiracy, alongwith any underlying substantive criminal conduct. Thisevidence is probative, not unduly prejudicial and,admissible under Rule 403.The objection to similar evidence regarding Cane andDiScala's dealings with respect to shares of Regenicin issomewhat marginal. Though, it too tends to explain howCane and DiScala came to be involved in their businessdealings with each other and the charged conspiracy.Regenicin, however, does appear to have a separate

structure and does relate to a different period of time.Nonetheless, it would not be too great a stretch toconclude that such proffered evidence satisfies the testfor admissibility as direct evidence. United States v.Carboni, 204 F.3d 39, 44 (2d Cir. 2000). Alternatively,since the evidence is probative of a common scheme orplan, such an offer would be admissible under Rule404(b). The proffer is not unfairly prejudicial and, to theextent that there is any prejudice at all, that prejudicewould be properly and effectively mitigated by anappropriate limiting instruction if requested. See, e.g.,United States v. Pipola, 83 F.3d 556, 566 (2d Cir. 1996);United States v. Levy, 731 F.2d 997, 1002 (2d Cir. 1984).This latter evidence relating to Regenicin is admissibleunder Rule 404(b).

(B) The government's motion,pursuant to Rules 401-403, or inthe alternative, Rule 404(b), toadmit evidence ofcontemporaneous businessdealings involving DiScala, Cane,and Craig Josephberg in"Company A" and "Company B."

(B) Cane and DiScala oppose this portion of thegovernment's first motion in limine, arguing that theproffered evidence is misleading, irrelevant, andprejudicial.The subject business dealings in Companies A &B include Josephberg, Darren Goodrich, and MarcWexler; relate to conduct that occurred at roughly thesame time as the Cubed scheme; and involve the use of

escrow accounts in a manner as similarly alleged inCubed. This is direct evidence of the charged crimes,and arises "out of the same transaction or series oftransactions as the charged offense" and is "inextricablyintertwined with the evidence regarding the chargedoffense." United States v. Hsu, 669 F.3d 112, 118-19 (2dCir. 2012); United States v. Kaiser, 609 F.3d 556, 570-71(2d Cir. 2010); United States v. Barrett, 153 F. Supp. 3d552, 567 (E.D.N.Y. 2015). The evidence is clearlyrelevant to the case, and its probative value outweighsany potential prejudice to the defendants. The evidenceis admissible as direct evidence of the charged crimes.

(C) The government's motion,pursuant to Rules 401-403, or inthe alternative, Rule 404(b), toadmit evidence of Cubed tradingthrough "nominee accounts" byKyleen Cane.

(C) Granted as unopposed.

(D) The government's motion,pursuant to Rules 401-403, or inthe alternative, Rule 404(b), to

(D) Cane and DiScala argue that the trading records areirrelevant, and in any event, are "cumulative, prejudicial,and distracting." Dkt. No. 413 at 12-14.

admit evidence of trading throughoffshore accounts by Kyleen Canein a company called CrownAlliance Capital Ltd. ("CACL").

With the exception of a discrete subset of thisproffered evidence, the defense has the better of theargument. As Cane notes, neither she nor anyone elsehas ever been charged in connection with anyirregularities involving CACL. More importantly, to theextent that the evidence has relevance, it is, essentially,cumulative of other evidence. Moreover, the otherwiseuncharged references to CACL and Cane's broader useof "Legacy Brokers" run the unnecessary risk ofconfusing the jury by sparking a mini-trial aboutuncharged manipulations of CACL stock.However, as to the admissible subset of evidence,the government may use other evidence described atpages 15 and 19 of its motion, regarding Cane's contactwith the Legacy Broker in connection with Cubed stock.This portion of the evidence is necessary to complete thestory of her dealings in that stock, which is one of thecharged crimes. This evidence is not prejudicial.

(E) The government's motion,pursuant to Rules 401-403, or inthe alternative, Rule 404(b), toadmit evidence of an extramaritalaffair by Michael Morris with

(E) In this trial, only DiScala opposes the use of thisevidence by the government, arguing, in sum andsubstance, that the "nature of the personal relationship"between Morris and the witness is "completely irrelevantand unnecessarily inflammatory." Dkt. No. 419 at 13.

government witness "HalcyonBroker 1."

The proffered evidence is relevant to howHalcyon Broker 1 came to be involved in the profferedstock fraud scheme and how she came to know and workwith Josephberg. It is direct evidence of the formation ofthe charged conspiracy. It is neither inflammatory norprejudicial with respect to defendants to be tried on April3rd. However, the ruling is subject to reconsideration atany trial that includes defendant Morris.

(F) The government's motion,pursuant to Rules 401-403, or inthe alternative, Rule 404(b), toadmit evidence of Josephberg andMorris's histories as traders: (1)Josephberg's disciplinary history;(2) a purported fraud that Morrisand Josephberg perpetratedthrough a company called CellTherapeutics; and (3) Morris'sdisciplinary history.

(F) It is not clear at this juncture precisely what portionof this evidence the government intends to proffer andfor what purpose or purposes. Accordingly, the Courtwill consider the proffer at the time of trial.

(G) The government's motion,pursuant to Rules 401-403, or inthe alternative, Rule 404(b), to

(G) DiScala opposes the government's motion on thispoint, arguing that the proposed evidence is bothirrelevant and prejudicial. The government seeks to

admit evidence of DiScala'salleged gambling habit.

introduce, at a minimum, testimony about a gamblingdebt that DiScala refused to pay, to "explain[], in part,why at least one co-conspirator who is expected to testifyat trial decided to step away from DiScala[]" during theCubed scheme.Since its significant prejudice far outweighs theminimal probative value of this evidence, the motion isdenied.

Unless otherwise indicated, all rule references will be to the Federal Rules of Evidence and further citation will be omitted.

2. Second and Third Government Motions in Limine

(A) The government's motion,pursuant to Rules 401-403, or inthe alternative, Rule 404(b), toadmit approximately 30 textmessages between Witness 1 andDiScala that reference both thecompanies mentioned in theindictment and other publiccompanies.

(A) DiScala opposes the proffered text evidence on thegrounds that the other public companies are not"inextricably intertwined" with the companies referencedin the indictment; not proper direct evidence of thecrimes; more prejudicial than probative; and,alternatively, that it is improper 404(b) evidence. Nor,he says, should the government be permitted to draw theteeth of its own witness.The government seeks introduction of theevidence on the ground that it is inextricably intertwinedwith, and necessary to complete the story of, the chargedoverarching conspiracy. In the alternative, thegovernment argues that the proffered evidence is

admissible under Rule 404(b) to show the "criminalnature of the relationship between Witness 1 andDiScala;" DiScala's "plan, preparation, and knowledge"as to his manipulation of the companies named in theindictment; and to elicit impeachment evidence to avoidthe perception that it has concealed evidence from thejury. Dkt. No. 461 at 7-8.The text messages, to the extent that they relate tocompanies that the indictment charged had stocks whichwere manipulated by any of the co-conspirators allegedlyin furtherance of the conspiracy, are clearly directevidence of the charged crimes, and admissible on a Rule401-403 analysis. Redaction of the text messages of anyreference to companies not identified in the indictmentwould, as the government argues, "materially alter themeaning and import of the communications[.]" Dkt. No.482 at 4.It may fairly be said that, to complete the story ofthe charged conspiracy, the government will need toexplain how DiScala and Witness 1 came to know eachother, and the text messages do provide "importantcontext and background to the scheme and therelationship" between DiScala and Witness 1. Dkt. No.

461 at 7. Additionally, text message evidence of anymanipulation of other companies, while uncharged, ornot, furthering the goals of the conspiracy are properlyadmissible as direct evidence. Any prejudicial effect ofthese text messages is more than outweighed by theprobative value of this evidence. Admission as directevidence will be permitted.

(B) The government's motion,pursuant to Rules 401-403, or inthe alternative, Rule 404(b), toadmit limited backgroundtestimony from Witness 1 as to hisand DiScala's manipulation of 5public companies not referencedin the Superseding Indictment.

(B) DiScala opposes this testimony for the same reasonsdiscussed immediately above in 2(A).For the reasons set forth in ruling in 2(A), theCourt will allow Witness 1 to testify in a briefbackground fashion as to the manipulation of five publiccompanies perpetrated by DiScala and Witness 1.Beyond brief is cumulative and will not be permitted.

(C) The government's motion,pursuant to Rules 401-403, or inthe alternative, Rule 404(b), toadmit text messages betweenKyleen Cane and an attorney whoworked at her law firm regardingpotential buyers for Northwest, the

(C) Cane opposes the introduction of these text messagesas irrelevant, but if found relevant, then cumulative. Thegovernment asserts that the texts are "direct evidence ofthe charged fraud offenses" and "inextricably intertwinedwith Cane's later control and manipulation of Cubedstock." Dkt. No. 491 at 7.

company that would later becomeCubed.

More specifically, the government contends thatthese messages are relevant to Cane's "knowledge andintent," and also show that, even if Northwestshareholders did not deal directly with Cane, that she"was aware of and directed" the activities of theassociates with whom they did deal. Id. at 9-10.Contrary to Cane's opposition, the texts areplainly relevant, as they tend to show that Cane directedher associate to quote stock shares and lead into the storyof how the other co-conspirators came into the Cubed"picture." It is non-cumulative evidence of chargedcrimes and will be admitted on that basis. Any unfairprejudice in admitting these texts is, assuming there isany, marginal.

3. Kyleen Cane's Motions in Limine



(A) Kyleen Cane's motion,pursuant to Rules 806 & 807, toadmit: (1) phone call excerptsfrom DiScala's cell phone gleanedfrom government wiretaps & (2)text messages from DiScala's cell

(A) The government and DiScala both oppose thismotion, albeit for different reasons.First, it appears that Cane has misapplied the Rule ofCompleteness as to the recordings and text messages.The Rule is intended to ensure that statements are notdistorted and that they are presented in full, to avoid

phone gleaned from governmentsearch warrants.

misleading a jury. The recordings and text messages thatCane contends should be admitted to complete acommunication otherwise partially admitted arethemselves complete communications, and do notcomplete partially admitted communications. Rule 106,therefore, does not supply an independent basis for theiradmission.Cane's other attempts to work around the hearsayobstacle in her stated strategy to shift all blame fromherself to DiScala all fail. As the government observes,the evidence she proffers is, in the ordinary course, thetype of evidence offered by the government to establishguilt, namely, communications made in furtherance of aclaimed conspiracy or made by a party opponent. As toCane, DiScala is not a party opponent nor does she haveany right or responsibility to pursue criminal charges ofconspiracy against DiScala. So, she cannot offer thesestatements allegedly made in furtherance of a conspiracyas an exception to the hearsay rule. Nor are they withrespect to her, the admissions of a party opponent. Theonly party in this action that is her party opponent is the

United States of America. Separately, she hasdemonstrated nothing that would bring thesecommunications within the confines of the residualexception to the hearsay rule.Of course, Cane might be able to offer thesecommunications for something other than the truth ofwhat they assert, that is, for a non-hearsay purpose.Should a declarant, for example, be called to testify attrial, these statements could be used by her to impeachand discredit the witness's testimony. The governmentadvises, however, that it has no current plan to call anyof these witnesses to the stand, meaning that this avenuealso appears foreclosed. Should circumstances change,though, Cane might yet have the opportunity to draw thejury's attention to them. For now, though, she hasprovided no appropriate basis for their admission and herin limine application seeking permission to offer them attrial is denied.

(B) Cane's motion, pursuant toRules 806, & 807: (1) opposing"opinion testimony" fromgovernment witness Oremland; (2)opposing providing summary

(B)(1) Kyleen Cane's motion to preclude Oremland, thegovernment's expert witness, from offering "an opinionregarding the legality of the defendant's conduct" isgranted without opposition. Dkt. No. 460 at 3.

charts prepared under FederalRule of Evidence 1006 to besubmitted to the jury duringdeliberations; and (3) requestinguse of a limiting instruction to thejury in connection withOremland's testimony as a"summary/expert witness."

But, Oremland, of course, may testify to providebackground information and to clarify terms, concepts,and regulatory requirements, as the government requests.Dkt. No. 460 at 7.(B)(2) Provided that the charts are properly admittedunder Rule 1006, with appropriate instructions as to thejury's "responsibility to determine whether the chartsaccurately reflected the evidence presented," such chartscan be submitted to the jury. United States v. Pinto, 850F.2d 927, 935 (2d Cir. 1988). Indeed, admission of thecharts themselves into evidence is not required. SecondCircuit case law supports the submission of charts to thejury as long as the Court provides the jury with properinstructions to the effect that it may not consider thecharts as evidence. United States v. Casamento, 887F.2d 1141. 1151 (2d Cir. 1989). It should be noted.however, that until a chart is presented to the Court, afinal ruling as to prejudice is reserved.(B)(3) Cane's request for the use of a limiting instructionprior to Oremland's testimony is unnecessary and is

denied. As the government has recognized, the Courtgave an expert testimony instruction in United States v.Kershner, 13-cr-452 (ENV), which should be appropriatehere. The Court will give an instruction at the close oftrial in accordance with Sand, Modern Federal JuryInstructions, Instruction 7-21.

(C) Cane's motion, pursuant toRules 806, & 807, to preclude thetestimony of governmentwitnesses Edgerton, Godfrey,Scoggins, and Washington.

(C) As the government asserts, the testimony isprobative, and goes to the heart of whether Cane"controlled free-trading stock held in the names ofothers." Dkt. No. 491 at 1. The proposed testimonyfrom Edgerton, Godfrey, Scoggins, and Washington isrelevant and probative of Cane's place in the Cubedscheme. The testimony is not, as the governmentcorrectly observes, "unfairly prejudicial," Dkt. No. 491at 7. Cane's motion to preclude their testimony isdenied.

Indeed, Cane's Reply to her First Motion in Limine, Dkt. No. 452, cites no case-law rebutting the opposition's.

The cases cited by Cane do not counsel a different result. For example, United States v. Arboleda, 20 F.3d 58, 62 (2d Cir. 1994), is inapposite - there, the jury asked for, listened to, and took notes about the prosecution's rebuttal summation regarding a witness. Summary charts are not summations. --------

So Ordered. Dated: Brooklyn, New York

March 19, 2018

/s/ Hon. Eric N. Vitaliano


United States District Judge

Summaries of

United States v. DiScala

Mar 19, 2018
14-cr-399 (ENV) (E.D.N.Y. Mar. 19, 2018)
Case details for

United States v. DiScala

Case Details



Date published: Mar 19, 2018


14-cr-399 (ENV) (E.D.N.Y. Mar. 19, 2018)