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June 20, 1984


The opinion of the court was delivered by: HAIGHT


HAIGHT, District Judge:

Defendant George G. Davis was convicted after a jury trial of one count of conspiracy in violation of 18 U.S.C. ยง 371. Prior to trial, defendant moved to dismiss the indictment pursuant to Rule 6(e), Fed.R.Crim.P., on the ground that he had been unduly prejudiced by the Government's improper sealing, and unreasonable delay in unsealing, the indictment. The claimed prejudice arose from the death of two allegedly exculpatory witnesses, one Jerry Shanks and one Martin Hambrose.

 In this Court's opinion of April 2, 1984, familiarity with which is assumed, I concluded that the Government's sealing of the indictment and the timing of the subsequent unsealing were entirely proper. With respect to the question of prejudice, defendant Davis contended that the testimony of the now-deceased Hambrose and Shanks would have been instrumental in undermining the credibility of his co-defendant Gerald Lee, now a cooperating witness. Specifically, their accounts of two brief conversations engaged in by Lee and Davis were expected to reveal inconsistencies between Lee's testimony at trial and prior statements he allegedly made.In short, defendant argued that pursuant to Rule 613, Fed.R.Evid., Lee could be cross-examined as to statements made in the presence Shanks and Hambrose and they could be called to discredit his testimony.

 The force of defendant's admissibility argument depended, of course, on the accuracy of his speculations regarding Lee's testimony. The anticipated testimony was described as follows:

 "Lee would testify on direct that David received $30,000.00 as a payoff in the South Carolina deal. That Bose had no part in it. Lee would deny he told Davis, before Shanks or Hambrose, that Bose was a participant." (Def. Br. at 7).

 The testimony of Shanks and Hambrose, on the other hand, would purportedly support defendant Davis's position that "he was not paid off and that any deal was between Lee and Bose." (Id.). As stated in this Court's prior decision:

 "Obviously, we cannot tell what Lee's testimony, on direct or cross, will be until he gives it. If that testimony emerges in a fashion other than Davis predicts, the argument under Rule 613 may well be undermined. That would arguably occur, for example, if Lee testified that David and Bose were co-venturers in Mamoni Shipping Co., and jointly benefited from illicit payments generated by the "south Carolina deal."

 "Since a defendant's burden in cases of this nature is to demonstrate "substantial actual prejudice," Muse, at 1043, I have concluded that the position can only be properly evaluated at the end of trial, and in the event of a conviction of Davis. At that time we will know just what Lee's testimony was on the pertinent points, as well as the totality of the evidence against Davis." (Mem. Op. of April 2, 1984, at 13).

 Accordingly, defendant's motion to dismiss was denied without prejudice to renewal after trial, at which time the Court would be in a better position to assess the actual prejudice to defendant's case.Defendant now renews his motion to dismiss the indictment and, in the event that application is denied, seeks a hearing to determine what efforts were made by the Government to aprehend Gerald Lee following the sealing of the indictment. With respect to the latter application, I have already carefully considered the circumstances giving rise to the sealing of the indictment and adhere to my earlier ruling that the Government acted properly and in aid of a legitimate prosecutorial need. See United States v. Muse, 633 F.2d 1041 (2d Cir. 1980) (en banc), cert. denied, 450 U.S. 984, 67 L. Ed. 2d 820, 101 S. Ct. 1522 (1981). The unsupported assertion that the Government's efforts to apprehend Lee were undertaken in connection with the 1983 indictment, but not in connection with the instant indictment, is entirely unpersuasive. Indeed, having determined that the Government acted reasonably and in good faith in procuring a sealed indictment, leave to renew the motion to dismiss was limited to the narrow question of whether actual prejudice to defendant occurred during the period when the indictment was sealed. See Muse, supra; United States v. Slochowsky, 575 F. Supp. 1562, 1567 (S.D.N.Y. 1983) ("If there is a legitimate prosecutorial need for the sealing, the defendants, to be entitled to dismissal, must be able to demonstrate actual prejudice occurring between the date of the sealing and the date of the unsealing.").

 With that question in mind, I turn first to the testimony of Gerald Lee regarding Interchange Design, Sukhamay Bose, and the now-disputed $30,000 payoff. At trial, Lee testified that Davis was the instigator of the Interchange Design scheme, the first to suggest the fraudulent means -- i.e., the creation of a dummy corporation -- whereby the co-conspirators could get their hands on "a windfall . . . coming to the company." (Tr. at 384-85). Once the scheme was implemented and funds were coming in, Lee testified that he "sat down and figured out how to divide [the profits] amongst the officers involved." (Tr. at 385). George Davis's alloted portion was $30,000, and Davis requested that the amount be delivered to him in the form of a check made out to a shipping company. (Tr. at 385-86). On cross-examination, Lee stated that he knew Sukhamay Bose only as "a gentleman who we signed a fraudulent consulting agreement with" (Tr. at 436); he knew of no connection between Bose and Mamoni Shipping Company. (Id.). Lee testified further that he was acquainted with Jerry Shanks, had on occasion seen him and greeted him in Pete's Tavern, but had never transacted business with him in that restaurant.(Tr. at 439-40). The name Martin Hambrose was not familiar to Lee, and he had no memory of a luncheon engagement with Hambrose in 1976. (Tr. at 440-41).

 Defendant argues that the testimony of both Shanks and Hambrose would have called into question the veracity of Lee's version of events. More specifically, according to defendant, Shanks would have testified that, in mid-1977, he was at the bar in Pete's Tavern with George Davis when Lee presented Davis with a $30,000 Interchange Design check made out to Mamoni Shipping Company, reminding Davis that, "as they had previously discussed, some money was due to Bose." (Hollman Aff. P29). Davis purportedly told Lee that "he remembered that being a problem," pocketed the check, and said he would take care of it. (Id.). Defendant argues that Shanks's testimony would indicate that Davis was merely a courier of sorts -- i.e., that the $30,000 check was intended for Bose, not Davis, apparently in connection with some unrelated transaction. Such testimony would be contrary to Lee's assertions regarding Davis's participation in, and profit from, the Interchange Design scheme.

 Hambrose's testimony, according to Davis, would further support defendant's version of events. Hambrose purportedly would testify that, at a luncheon meeting with Davis and Lee in 1977, Lee was called away from the table to take a telephone call and returned in a highly agitated state. The explanation for his agitation, according to Hambrose's anticipated testimony, would be that Bose was "trying to screw him" by demanding money in addition to the $30,000 check that Lee had already given Davis to turn over to Bose. Hambrose's testimony would further indicate that Davis told Lee he remembered the $30,000 check and that "Bose now had the money." (Hollman Aff. P32). This testimony, defendant argues, would demonstrate that Davis was not a party to any payoff between Lee and Bose.

 The Government continues to argue, with some force, that Davis's claim of prejudice is premised on a purely speculative, and highly unlikely, assertion of what Shanks's and Hambrose's testimony would actually be. Counsel for defendant, in an initial telephone call with Shanks prior to his death, learned only that Shanks "was familiar with the South Carolina matter, and knew of Shuk Bose." (Hollman Aff. P30). Although Shanks indicated that he was friendly with defendant Davis and would be willing to talk further with Mr. Hallman, there was no discussion of the Pete's Tavern encounter. Hambrose, who died in 1982, was never initially interviewed. This is not, in other words, a situation where defense counsel elicited from now-unavailable witnesses some concrete indication of what their testimony would be. Rather, defendant's claim of prejudice turns on the presumption that Shanks and Hambrose would share his apparently vivid memory of two brief conversations overheard some seven years ago. The Government questions this assumption and disputes as inherently incredible the notion that "Davis and Lee would have had such incriminating conversations in the presence of uninvolved persons." (Gov't Letter of March 27, 1984, p. 2).

 I, too, am troubled by the possibility that dismissal of a properly sealed indictment may be achieved on the strength of a defendant's unsupported and uncorroborated assertions of what a deceased witness's testimony would, in fact, have been. The temptation to portray that testimony as highly exculpatory, and thereby demonstrate the requisite "actual prejudice," is obviously strong. A useful analogue in circumscribing and giving content to the "actual prejudice" standard referred to in Muse, supra, are those cases involving pre-indictment delay, where dismissal is also predicated on a showing of actual prejudice. In such circumstances, courts have repeatedly held that the burden of demonstrating prejudice occasioned by the lapse of time is on the defendant, and "the proof of prejudice must be definite and not speculative." United States v. Birney, 686 F.2d 102, 105-06 (2d Cir. 1983). See also United States v. Edwards, 577 F.2d 883, 891 (5th Cir. 1978) (claim of prejudice arising out of the death of an allegedly material defense witness held insufficient in light of the sparse nature of the record concerning the testimony the defense could have elicited from the deceased); United States v. Ciraulo, 486 F. Supp. 1125 (S.D.N.Y. 1980) (conclusory assertion that passage of time had weakened the memory of potential defense witnesses and eliminated evidence that would otherwise have been available to defendant was, without more specific evidential support, insufficient to demonstrate actual prejudice); United States v. Elsbery, 602 F.2d 1054, 1059 (2d Cir. 1979) (defendant's claim that potential defense witnesses were lost by Government intimidation during the lengthy pre-indictment period, and that other defense witnesses' memories had dimmed, was insufficient to demonstrate substantial actual prejudice); United States v. Valenzuela-Bernal, 458 U.S. 858, 73 L. Ed. 2d 1193, 102 S. Ct. 3440 (1981) (finding of prejudice of defendant occasioned by delay requires "some plausible explanation of the assistance he would have received from the testimony of [now-unavailable] witnesses").

 Where the prejudice claimed arises out of the death of a defense witness, one court recently stressed the defendant's obligation "to demonstrate the general content of the lost evidence and show that it had a material connection with his defense to the crimes charged." United States v. Sample, 565 F. Supp. 1166, 1175 (E.D.Va. 1983). The court went on to observe that when the only source of information as to the substance of the lost testimony is the defendant himself, "the defendant's incentive to emphasize, perhaps over-emphasize, the importance of the dead witness cannot be overlooked." Id. at 1175. In Sample, the court found "actual prejudice" occasioned by the death of a potential defense witness, but only after determining that defendant's characterization of that testimony was amply corroborated by a lengthy deposition of the deceased witness taken in the course of a prior civil action. As stated by the court:

 "Mr. Seidell's deposition thus firmly establishes the general and in some instances the specific content of what his testimony would be were he alive to testify at a criminal trial in Sample's behalf. On the basis of the deposition, there is no doubt that Mr. Seidell's testimony would be heavily favorable to the defendants.The deposition testimony specifically refutes a number of the allegations of false statements contained in the indictment and refutes the allegations in the indictment that these statements were knowingly false and fraudulent. . . . If credited by a jury, Mr. Seidell's testimony would at the least create a reasonable doubt as to defendants' guilt. Indeed, his testimony exonerated defendants."

 No such corroboration of the alleged Shanks and Hambrose testimony has been offered here, and I would be loathe to dismiss the indictment on the basis of defendant's potentially self-interested depiction of what that testimony would reveal. But even assuming that their testimony would have followed the lines defendant suggests, I cannot conclude, in light of the totality of the evidence presented against Davis, that defendant has been prejudiced.

 At best, the Shanks and Hambrose testimony would suggest to the jury that the $30,000 Interchange Design check made out to Mamoni Shipping Company was not, as Lee testified, Davis's share of the illegal profits but was instead intended as a payment for Bose in connection with some other transaction. To the extent that this distribution of the illegal profits differs from that suggested by Lee, the testimony is arguably exculpatory. But Shanks would also allegedly testify that he told Davis, based on his observations at Frigitemp, that Lee was "stealing the place blind" through use of the Interchange Design Company, to which defendant responded, apparently in tacit agreement, that he planned to resign from Frigitemp. (Hollman Aff. P29). This conversation, coupled with Hamborse's anticipated testimony -- that defendant subsequently assured Lee he had taken care of paying off Bose with the $30,000 check (Id. P33) -- would, in my view, by inculpatory, as evidence of Davis's knowing participation in the conspiracy and his role as distributor of the fraudulent proceeds. It is not, of course, necessary to personally profit from a fraudulent scheme to be found guilty of conspiracy.

 Even aside from the questionable value of the Shanks and Hambrose testimony to defendant's case, proof of Davis's participation in the conspiracy charged was not dependent on Lee's testimony as to the particular distribution of profits or the handling of the $30,000 Interchange Design check. First, as noted above, Lee testified that the initial impetus for the Interchange Design scheme came from Davis, who worked with Arnold Suekoff to implement the scheme. (Tr. at 384-85). Suekoff testified in detail as to the steps involved in locating and setting up the dummy corporation.George Davis was the reference Suekoff listed in establishing Interchange Design's bank account at Banco Populare (Tr. at 135), and Davis personally directed Suekoff to type, from Davis's handwritten copy, the false contract between Interchange Design and Frigitemp (Tr. at 136). Periodically, Davis told Suekoff to prepare false Interchange Design invoices in specific amounts for services purportedly rendered to the Environmental and Energy Division of Frigitemp (Tr. at 136-37), and Davis further directed Suekoff to type various fraudulent letters, which Davis himself had drafted, concerning the Interchange Design/Frigitemp agreement. (Tr. at 139-155).

 Other witnesses also testified as to Davis's central role in the Interchange Design conspiracy. David Logan stated that he signed a number of Interchange Design invoices, thereby authorizing payment from Frigitemp, at the direction of defendant Davis. His testimony was as follows:

 Q. Now, Mr. Logan, you have testified that your signature appears on a number of these invoices and your name appears on several others.

 Can you tell us how you came to put your signature on the ones that you admit you did sign?

 A. I was asked to by Mr. Davis.

 Q. Could you tell us how that happened?

 A. I think he just showed them to me and asked me to sign them, and I believe I asked why, and he said, Don't worry about it, just sign them. So, I did.

 (Tr. at 338-39).

 As Frigitemp's general counsel, Lee Mermelstein was asked to review the proposed -- and, unbeknownst to him, fraudulent -- contract between Interchange Design and Frigitemp. It was George Davis who met with Mermelstein and worked with him in drafting the dummy contract that Mermelstein eventually felt was satisfactory. (Tr. at 499-502). Mermelstein further testified that, at a later time, he became concerned about what appeared to be an illegitimate modification of the contract to pay an additional $110,000 to Interchange Design. Mermelstein voiced his concern to Lee, who apparently passed along that concern to the individual responsible for the modification, George Davis. The excess, and now suspect, fraudulent profit was thereafter cancelled. (Tr. at 506-513).

 After considering the totality of evidence presented at trial regarding Davis's participation in the Interchange Design conspiracy, I cannot conclude that the alleged Shanks and Hambrose testimony could, even if credited by a jury, create a reasonable doubt as to defendant's guilt. That is the criterion imposed by Sample, supra, a pre-indictment delay case in which defendant complained of a deceased witness. Cf. United States v. Agurs, 427 U.S. 97, 112, 49 L. Ed. 2d 342, 96 S. Ct. 2392 (1975) (where prosecution wrongfully suppresses exculpatory evidence, constitutional error arises only "if the omitted evidence creates a reasonable doubt that did not otherwise exist," a test requiring "that the omission must be evaluated in the context of the entire record"). Indeed, his involvement in the scheme would appear to be so substantial as to suggest to a jury another, perhaps more credible, explanation for the Shanks testimony -- that Lee and Davis were speaking guardedly and with the intention to conceal from Shanks, a stranger to the fraud, the true nature of the payoff. In sum, I do not find that defendant has demonstrated actual substantial prejudice sufficient to warrant dismissal of the indictment. See United States v. Birney, 686 F.2d 102, 105 (2d Cir. 1982) (loss of bank records allegedly vital to defense during period of pre-indictment delay was not sufficient to demonstrate actual prejudice in light of other evidence of guilt presented by the Government).

 For the reasons stated, defendant's motion to dismiss the indictment and, in the alternative, for an evidentiary hearing is denied.



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