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May 13, 1982

Martin B. ABRAMS, et al., Defendants

The opinion of the court was delivered by: STEWART


Defendants Martin Abrams, Irving Cotler, Michael Gold, Frederick Pierce, and Leonard Siegel are jointly charged with fifteen counts of wire fraud, and one count of endeavoring to obstruct the communication of information regarding a federal criminal offense. In addition, defendant Abrams is charged with another count of obstructing a criminal investigation, and one count of tax fraud; defendant Siegel is charged with endeavoring to obstruct a grand jury investigation and one count of tax fraud; and defendant Gold is charged with two counts of tax fraud. All five defendants have filed various pretrial motions and discovery requests. A number of these requests were discussed at a pretrial conference held May 3, 1982. This Memorandum Decision disposes of all requests still outstanding after the May 3 conference, and summarizes those matters disposed of by agreement at the conference last week.

 Severance Motions

 Four of the five defendants (Cotler, Gold, Pierce and Siegel) move for severance of their cases from the joint trial of the other defendants. Defendants Gold, Cotler and Pierce assert they will suffer prejudice in a joint trial by virtue of gross disparities in the amount of evidence to be offered against them, as compared to other defendants. Defendants Gold, Pierce and Siegel also claim potential prejudice by virtue of defendant Cotler's criminal record and statements to be introduced against him which, they argue, impermissibly inculpate them. Defendant Gold also asserts that antagonistic defenses bar a joint trial. For the reasons that follow, we deny all requests for severance at this time.

 Rule 14 of the Fed.R.Crim.P. provides that "if it appears that a defendant ... is prejudiced by the joinder ... of defendants ... for trial together, the court may ... grant a severance or provide whatever relief justice requires". The decision to sever is a matter left to the sound discretion of the district court. United States v. Aloi, 449 F. Supp. 698, 739 (E.D.N.Y.1977) (citing, inter alia, Opper v. United States, 348 U.S. 84, 95, 75 S. Ct. 158, 165, 99 L. Ed. 101 (1954)). To warrant exercise of the court's discretion, the moving defendant must come forward with a showing that a joint trial would not merely lessen his chances of acquittal, but would in effect deny him a fair trial altogether. Id. (citing United States v. Borelli, 435 F.2d 500, 502 (2d Cir. 1970), cert. denied, 401 U.S. 946, 91 S. Ct. 963, 28 L. Ed. 2d 229 (1971)). In determining whether severance is appropriate, a district judge should consider, among other things, the number of counts and defendants, see United States v. Branker, 395 F.2d 881, 887 (2d Cir. 1968), cert. denied, 393 U.S. 1029, 89 S. Ct. 639, 21 L. Ed. 2d 573 (1969); disparities in the quantum of proof offered against the various defendants, see United States v. Kelly, 349 F.2d 720, 759 (2d Cir. 1965), cert. denied, 384 U.S. 947, 86 S. Ct. 1467, 16 L. Ed. 2d 544 (1966); possible prejudice from the type of evidence (e.g. prior convictions) to be admitted against some of the defendants, see United States v. Figueroa, 618 F.2d 934, 945 (2d Cir. 1980); and the apparent relative culpability of the defendants, see United States v. Gilbert, 504 F. Supp. 565, 571 (S.D.N.Y.1980). The ultimate question for the district court is whether the jury will be able to "compartmentalize" the evidence presented to it, and distinguish among the various defendants in a multi-defendant suit. United States v. Corr, 543 F.2d 1042, 1052-53 (2d Cir. 1976).

 In this case, we have examined not only the parties' motion papers, but also evidence adduced in United States v. Stuckey, SS 81 Cr. 0035 (CES), a previous trial of a Mego employee involved with the fraudulent sale of corporate assets alleged here. On the basis of these materials, we conclude that the danger of prejudice to any defendant by virtue of a joint trial appears minimal at this time. This is not a case of unmanageable proportion: it has twenty counts and five defendants. While large, it is not of the scale considered in United States v. Branker, 395 F.2d at 882 (84 counts and eight defendants) or United States v. Kelly, 349 F.2d at 727 (60 counts and 20 defendants). Nor is this a case where some of the defendants are charged in only a few of the counts, see United States v. Gilbert, 504 F. Supp. at 566, as all of the defendants here are charged in sixteen of the twenty counts. While the government's case undoubtedly contemplates proof of differing types and degrees of involvement in the fraudulent scheme alleged, no defendant appears to be charged with so minor a role that he can be considered an alleged "silent partner", see United States v. Corr, 543 F.2d at 1052, or an "innocent dupe", see United States v. Gilbert, 504 F. Supp. at 570. The indictment alleges that defendant Gold intentionally misrepresented Mego's financial and management situation to independent auditors, and instructed a Mego accountant to conceal William Stuckey's participation in the secret cash sales of Mego merchandise. This latter allegation is supported by testimony of Stephen Weingrow, accountant for Mego, in the Stuckey trial. See Transcript of Trial Proceedings, United States v. Stuckey, SS 81 Cr. 0035 (CES) at 60. The indictment also alleges that defendant Pierce directed William Stuckey to transfer cash proceeds to defendant Cotler, and that Pierce himself gave cash to Cotler on another occasion. We do not, of course, express any opinion as to the guilt or innocence of these defendants as to these charges. But finding that defendants Cotler, Gold and Pierce are charged with substantial participation in the scheme to defraud, we cannot say at the present time that they will be unduly prejudiced by a trial with those who are charged with even greater roles. See United States v. Aloi, 449 F. Supp. at 741. Given the moderate size of the case, careful instructions should be able to neutralize any "spillover" which might occur. We acknowledge defendant Cotler's argument that his status as an outsider may be a source of prejudice (as the jury could erroneously impute evidence of breaches of fiduciary duty offered against the other defendants to him), but we reject it. Marked differences among defendants have been noted to be a source of reduced danger of spillover. See United States v. Papadakis, 510 F.2d 287, 300 (2d Cir.), cert. denied, 421 U.S. 950, 95 S. Ct. 1682, 44 L. Ed. 2d 104 (1975) (danger of spillover minimal in joint trial of drug sellers and purchaser). We believe a jury should be able to grasp and apply the relevant distinctions in this case.

 We also reject the arguments of defendants Gold, Pierce and Siegel that defendant Cotler's criminal record and statements to the F.B.I. require a severance at this time. The government has indicated that it does not intend to introduce Cotler's racketeering conviction as part of its case-in-chief, but only to impeach Cotler should he take the stand. As yet, Cotler has not indicated whether he will testify or not. It is thus quite possible that the issue of Cotler's conviction will not come up at trial at all. Should Cotler testify (and should we find the conviction admissible under Fed.R.Evid. 609(a)), moreover, we are not convinced by the arguments adduced thus far that this conviction poses the "high risk of prejudice" discussed in United States v. Figueroa, 618 F.2d 934, 946 (2d Cir. 1980). In sum, therefore, we find the risk of prejudice from Cotler's conviction too remote to warrant severance at this time. For similar reasons, we also decline to grant defendants Gold, Pierce and Siegel severance on the basis of Cotler's statement to the F.B.I. that "all you have in your investigation is a bunch of guys who are stealing their companies blind". The present record is not sufficient to determine the statement's admissibility under Fed.R.Evid. 403. Only after that determination is made may we be faced with the statement's effect on the defendants' rights under the Sixth Amendment, see Bruton v. United States, 391 U.S. 123, 137, 88 S. Ct. 1620, 1628, 20 L. Ed. 2d 476 (1968), and the efficacy of cautionary instructions in this context. See, e.g., United States v. Wingate, 520 F.2d 309, 314 (2d Cir. 1975). Should we then conclude that the statement is impermissibly inculpatory as those defendants, moreover, the government may choose to forego its use to avoid the need for severance. See United States v. Figueroa, 618 F.2d 934, 944 (2d Cir. 1980). In short, therefore, it is again unclear whether this statement will present any problem at trial at all; if problems do arise, they can be remedied by means short of severance.

 Finally, we reject defendant Gold's argument that the possibility of conflicting defenses requires severance at this time. "[To] obtain severance on the ground of conflicting defenses, it must be demonstrated that the conflict is so prejudicial that defenses are irreconcilable, and the jury will unjustifiably infer that this conflict alone demonstrates that both are guilty." United States v. Davis, 623 F.2d 188, 195 (1st Cir. 1980) (citing United States v. Becker, 585 F.2d 703, 707 (4th Cir. 1978), cert. denied, 439 U.S. 1080, 99 S. Ct. 862, 59 L. Ed. 2d 50 (1979); United States v. Robinson, 139 U.S. App. D.C. 286, 432 F.2d 1348, 1351 (D.C.Cir.1970); United States v. Ehrlichman, 178 U.S. App. D.C. 144, 546 F.2d 910 (D.C.Cir.1976), cert. denied, 429 U.S. 1120, 97 S. Ct. 1155, 51 L. Ed. 2d 570 (1977)). In this case, we do not find that defendant Gold's argument that he told the truth to Abramowitz because he had nothing to hide while the other defendants lied could have this impermissibly prejudicial effect.

 Defendant Cotler's Motion to Dismiss the Wire Fraud Counts

 We deny defendant Cotler's motion for dismissal of the wire fraud counts as to him on the basis that he committed no acts "in furtherance" of the alleged scheme to defraud. We assume the argument challenges the legal sufficiency of Counts 1-15 of the indictment as to defendant Cotler since factual matters are not to be determined on a motion to dismiss. See United States v. Barta, 635 F.2d 999, 1002 (2d Cir. 1980), cert. denied, 450 U.S. 998, 101 S. Ct. 1703, 68 L. Ed. 2d 199 (1981). An indictment is sufficient if it, first, contains the elements of the offense charged and fairly informs the defendant of the charge against which he must defend, and second, enables him to plead an acquittal or conviction in bar of future prosecutions for the same offense. United States v. Bailey, 444 U.S. 394, 414, 100 S. Ct. 624, 636, 62 L. Ed. 2d 575 (1980). To prove a violation of 18 U.S.C. ยง 1343, the government must prove that the defendant was a knowing participant in a fraudulent scheme that was furthered by the use of interstate transmission facilities. United States v. Corey, 566 F.2d 429, 430 n.2 (2d Cir. 1977). In this case, the government has alleged the existence of a scheme to misappropriate corporate assets for the benefit of corporate executives and to bribe others, and alleged that on fifteen specific occasions, interstate telephone calls were made in furtherance of this scheme. The government further alleges defendant Cotler's knowing participation in this scheme, evidenced by his acceptance of cash from William Stuckey on two separate occasions for the purpose of bribing others. We reject Cotler's argument that the acceptance of misappropriated cash for the purpose of bribing others "is not even arguably in furtherance of a scheme to defraud others". Memorandum of Law Submitted in Support of Defendant Irving Cotler's Pretrial Motions at 30. Whether any of these allegations will be found as fact by the jury is a question that awaits trial. What is relevant to this stage of the proceedings, however, is that the indictment states the elements of the offense of wire fraud as to defendant Cotler, and informs him of the charge against which he must defend. As the indictment sufficiently identifies the offense charged, it presumably meets the second test of sufficiency: protection against double jeopardy. Accordingly, we decline to dismiss the wire fraud count as to defendant Cotler on this basis.

 We also deny defendant Cotler's motion to dismiss on statute of limitations grounds. "The fact that a scheme may extend back beyond the limitation period does not outlaw an offense committed in furtherance of that scheme within the period." United States v. Andreas, 458 F.2d 491 (8th Cir.), cert. denied, 409 U.S. 848, 93 S. Ct. 54, 34 L. Ed. 2d 89 (1972) (quoting United States v. Gross, 416 F.2d 1205, 1210 (8th Cir. 1969) (Blackmun, J.)). In this case, the fifteen phone calls alleged to have been made in furtherance of the scheme to defraud are all within the limitations period. This action is therefore timely as to defendant Cotler, despite the fact that the indictment also alleges that he committed other acts in furtherance more than five years prior to the filing of the indictment.

 Defendant Abrams' Motion to Dismiss Obstruction of Justice Counts

 Defendant Abrams moves to dismiss Counts 16 and 17 of the indictment (the obstruction of justice counts) for failure to state the "essential facts constituting the offenses charged" as required by Fed.R.Crim.P. 7(c). Abrams argues that the lack of factual specificity in these counts violates the Sixth Amendment's guarantee that "in all criminal prosecutions, the accused shall enjoy the right ... to be informed of the nature and cause of the accusation ...". While we believe that the legal insufficiency of these counts is more properly traced to the strictures of the Fifth, rather than the Sixth Amendment to the Constitution, we agree that these counts are legally insufficient. Accordingly, we grant defendant Abrams' motion to dismiss these counts.

 Rule 7(c) of the Federal Rules of Criminal Procedure requires that the indictment contain a "plain, concise and definite written statement of the essential facts constituting the offense charged". This requirement performs three constitutionally required functions. First, it fulfills the Sixth Amendment guarantee cited by defendant Abrams to be informed of the "nature and cause of the accusation". Second, it prevents any person from being "subject for the same offense to be twice put in jeopardy of life or limb" as required by the Fifth Amendment. Finally, it preserves the protection given by the Fifth Amendment from being held "to answer for a capital or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury". United States v. Silverman, 430 F.2d 106, 110 (2d Cir. 1970), cert. denied, 402 U.S. 953, 91 S. Ct. 1619, 29 L. Ed. 2d 123 (1971). This third constitutional consideration is the source of several well established principles of federal criminal procedure, including the prohibition against the amending of indictments except by resubmission to the grand jury, and the bar against the "curing" of defective indictments by issuance of a bill of particulars. The rationale for these rules is clear: they guard against the possibility, however slight, that "a defendant could ... be convicted on the basis of facts not found by, and perhaps not even presented to, the grand jury which indicted him". Russell v. United States, 369 U.S. 749, 770, 82 S. Ct. 1038, 1050, 8 L. Ed. 2d 240 (1962). Similarly, the Indictment Clause of the Fifth Amendment ...

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