UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK
May 13, 1986
UNITED STATES OF AMERICA,
SALVATORE SANTORO, PAUL VARIO, FRANK MANZO, HENRY BONO, JR., HARRY DAVIDOFF, FRANK CALISE, JOHN RUSSO, HEINO BENTHIN, PASQUALE RAUCCI, LEONE MANZO, and WILLIAM BARONE, Defendants
The opinion of the court was delivered by: MCLAUGHLIN
MEMORANDUM AND ORDER
McLAUGHLIN, District Judge
This case centers on the activities of a group of individuals alleged to constitute an enterprise called the Lucchese Crime Family. Count One of the indictment charges ten of the eleven defendants with violating the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961(1)(B), (1)(D) and (5), by conspiring to conduct the affairs of that enterprise through a pattern of racketeering activity. In Count One the government also seeks the forfeiture of almost one million dollars pursuant to 18 U.S.C. §§ 1963(a)(1), (3).
The remaining twenty-two counts charge various offenses, most of which involve businesses in or around John F. Kennedy ("JFK") Airport. The crimes charged include: extortion of labor peace payoffs -- bribes to ensure that union labor problems would not disrupt business -- from several freight companies; extortion involving a proposed merger of two freight companies; insider trading in the stock of one of those companies; and mail fraud in connection with the purchase of certain bonds.
Defendants have made numerous motions. Some are addressed to the indictment itself. Others seek information or concern the conduct of the government in investigating and prosecuting this case.
I. MANZO ELECTRONIC SURVEILLANCE
A. Inadequacy of Other Investigative Procedures
Defendants have raised numerous challenges to the electronic surveillance conducted by the government. The first involves two bugs placed in the home of Frank Manzo and a tap placed on Manzo's telephone. Defendants argue that the fruits of these surveillances must be suppressed because the government applications did not meet the "other investigative procedures" requirement of 18 U.S.C. § 2518, which provides, in relevant part:
(1) Each application for an order authorizing or approving the interception of a wire or oral communication . . . shall include the following information:
(c) a full and complete statement as to whether or not other investigative procedures have been tried and failed or why they reasonably appear to be unlikely to succeed if tried or to be too dangerous;
(3) Upon such application the judge may enter an ex parte order . . . authorizing or approving interception . . . if the judge determines on the basis of facts submitted by the applicant that --
(c) normal investigative procedures have been tried and have failed or reasonably appear to be unlikely to succeed if tried or to be too dangerous;
Defendants contend that the affidavits submitted to establish this "necessity" requirement are insufficient.
The bug orders, which were signed by Judge Weinstein on May 3, 1983 and June 13, 1983, and by Judge Glasser on July 13, 1983, August 12, 1983 and September 14, 1983, rely primarily on the May 3, 1983 affidavit of Federal Bureau of Investigation ("FBI") Special Agent William Carden. The wiretap orders, which were signed by Judge Glasser on July 22, 1983 and by this Court on August 19, 1983 and September 19, 1983, rely on the July 23, 1983 affidavit of Special Agent Martin J. Towey.
Defendants challenge these affidavits on the grounds that they incant ritualistic recitations of the unfeasibility of alternative investigative techniques and provide no reasons specific to this case. If affidavits such as this are sufficient, defendants argue, electronic surveillance would be virtually automatic whenever the government alleges a complicated conspiracy.
The Second Circuit has discussed the inadequacy requirement on many occasions.
[T]he purpose of these "other investigative techniques" requirements "is not to foreclose electronic surveillance until every other imaginable method of investigation has been unsuccessfully attempted, but simply to inform the issuing judge of the difficulties involved in the use of conventional techniques." . . . Moreover, the required showing is to "be tested in a practical and commonsense fashion." 1968 U.S.Code & Admin.News [2122,] 2190. In short, the requirement is "simply designed to assure that wiretapping is not resorted to in situations where traditional investigation techniques would suffice to expose the crime." United States v. Kahn, 415 U.S. 143, 153 n.12, 94 S. Ct. 977, 982, 39 L. Ed. 2d 225 (1974).
United States v. Martino, 664 F.2d 860, 868 (2d Cir. 1981) (quoting United States v. Fury, 554 F.2d 522, 530 (2d Cir.) (footnote omitted), cert. denied, 433 U.S. 910, 97 S. Ct. 2978, 53 L. Ed. 2d 1095 (1977)), cert. denied, 458 U.S. 1110 (1982).
[W]hile traditional surveillance techniques need not be exhausted first if they are "impractical" or costly and inconvenient, United States v. Robertson, 504 F.2d 289, 293 (5th Cir. 1974), cert. denied, 421 U.S. 913, 95 S. Ct. 1568, 43 L. Ed. 2d 778 (1975), nevertheless Congress -- and, we may add, the New York legislature --
evinced the clear intent to make doubly sure that the statutory authority be used with restraint . . . . These [wiretap] procedures were not to be routinely employed as the initial step in criminal investigation. Rather, the applicant must state and the court must find that normal investigative procedures have been tried and failed or reasonably appear to be unlikely to succeed if tried or to be too dangerous.
United States v. Giordano, 416 U.S. 505, 515, 94 S. Ct. 1820, 1826, 40 L. Ed. 2d 341 (1974).
United States v. Lilla, 699 F.2d 99, 102-03 (2d Cir. 1983).
The requirement of a "full and complete statement" regarding procedures attempted or considered prior to the application for a wiretap serves both to underscore the desirability of using less intrusive procedures and to provide courts with some indication of whether any efforts were made to avoid needless invasion of privacy. Like other courts, we reject generalized and conclusory statements that other investigative procedures would prove unsuccessful.
Id. at 104 (citations omitted). But "[n]either the New York nor the federal statute requires that any particular investigative procedures be exhausted before a wiretap may be authorized. Wiretaps are 'neither a routine initial step nor an absolute last resort.' Note, The United States Courts of Appeals: 1975-76 Term Criminal Law and Procedure, 65 Geo. L.J. 209, 247 (1976)." Id.
"Viewing the affidavits submitted in support of the wiretap [and bug] applications in a '"common sense and realistic fashion,'" and with the deference properly accorded to the issuing judge," United States v. Ruggiero, 726 F.2d 913, 924 (2d Cir.) (citations omitted), cert. denied, 469 U.S. 831, 105 S. Ct. 118, 83 L. Ed. 2d 60 (1984), I find that the affidavits here satisfy the statutory requirements. They amply detail the wide-ranging nature of the alleged conspiracy and the reasons why traditional methods had proven and would prove to be insufficient.
The enterprise that was being investigated allegedly centered on a major organized crime family that controlled a powerful labor union and used that relationship to engage in various illegal activities -- including extortion of labor peace payoffs -- involving several businesses operating at JFK Airport. "This was no 'small time . . . case' . . . where simple investigative techniques might have sufficed, but a far-flung conspiracy that was impenetrable except by sophisticated electronic means." United States v. Wilkinson, 754 F.2d 1427, 1434 (2d Cir.), cert. denied, 472 U.S. 1019, 105 S. Ct. 3482, 87 L. Ed. 2d 617 (1985).
The affidavits make clear that for fear of retaliation witnesses were unwilling to testify. The same threat of violence made undercover infiltration too dangerous, and the suspicious, close-knit nature of the target group made such an approach quixotic. Physical surveillance and telephone records had proven of limited usefulness because they did not reveal the subject matter of the meetings and conversations, and thus gave little insight into the scope of the conspiracy.
Search warrants were also unlikely to be fruitful because the crimes being investigated were not of a sort to be memorialized in written records. Finally, grand jury investigations and interviews would tip the government's hand by exposing the investigation, thus probably preventing the gathering of evidence as to the full scope of the operation. Thus, viewing the case in a "common sense and realistic fashion," U.S. v. Ruggiero, supra, 726 F.2d at 524, the inadequacy of alternative investigative techniques was amply and specifically demonstrated. See generally U.S. v. Ianniello, 621 F. Supp. 1455, 1464-66 (S.D.N.Y. 1985); U.S. v. Persico, 621 F. Supp. 842, 863-65 (S.D.N.Y. 1985).
Defendants argue that the Court, in analyzing the adequacy of the government's showing, should discount the unwillingness of witnesses to testify. They suggest that before resorting to electronic surveillance, the government should have threatened those witnesses -- informants and employer/victims with contempt, RICO or obstruction prosecutions in order to coerce their testimony. Aside from the fact that such an approach might compromise confidential sources or expose the investigation, I do not believe Congress intended that the government be required to prosecute victims and marginal actors in a criminal enterprise before being permitted to use electronic surveillance to gather evidence against those it believes to be the main wrongdoers. The government need not show that it has exhausted every conceivable avenue of investigation. United States v. Terry, 702 F.2d 299, 310 (2d Cir.), cert. denied, 461 U.S. 931, 103 S. Ct. 2095, 77 L. Ed. 2d 304 (1983).
Defendants next argue that even if the original affidavits adequately explained why alternative techniques were not feasible, subsequent applications failed to show a continuing need for electronic surveillance. I disagree.
Having examined the later applications, I find that they meet the requirements of the statute. That useful evidence was gleaned from the prior interceptions did not make traditional techniques any less risky or any more likely to succeed. It is easy to engage in "Monday morning quarterbacking as to what investigative techniques the agents should have employed," but I am satisfied that the government has met its burden of providing "[a) reasoned explanation, grounded in the facts of the case, [that] 'square[s] with common sense.'" United States v. Shipp, 578 F. Supp. 980, 989 (S.D.N.Y. 1984) (quoting United States v. Lilla, 699 F.2d 99, 105 (2d Cir. 1983)), aff'd sub nom. United States v. Wilkinson, 754 F.2d 1427 (2d Cir.), cert. denied, 472 U.S. 1019, 105 S. Ct. 3482, 87 L. Ed. 2d 617 (1985).
Finally, defendants argue that even if the affidavits are adequate on their faces, the Court should order a hearing to test the veracity of the representations contained therein. Defendants wish to question the agents about, for example, the unwillingness of witnesses to testify and the impracticality of infiltrating the alleged conspiracy.
Defendants are not entitled to an evidentiary hearing merely because they disagree with the government's or the issuing judge's assessment of the situation described in the application or because they wish to elicit further details about the investigation. "There must be allegations of deliberate falsehood or of reckless disregard for the truth, and those allegations must be accompanied by an offer of proof." Franks v. Delaware, 438 U.S. 154, 171, 57 L. Ed. 2d 667, 98 S. Ct. 2674 (1978). The conclusory allegations of defendants do not constitute the "substantial preliminary showing" which must be made in order to entitle them to a hearing. Compare, e.g., United States v. Figueroa, 750 F.2d 232, 237 (2d Cir. 1984) (mere allegation that events described in affidavit did not take place is insufficient to meet "sensible threshold" required for a hearing) (quoting Franks v. Delaware, supra, 438 U.S. at 170) with United States v. Ippolito, 774 F.2d 1482, 1484 (9th Cir. 1985) (agent told witness to refuse to testify so that necessity of wiretap could be demonstrated; government "did not seriously challenge the fact of intentional deception").
Accordingly, for the reasons stated above, I find that there has been no violation of 18 U.S.C. §§ 2518(1)(c), (3)(c) with regard to either the Manzo bugs or the Manzo wiretap.
Defendants next seek suppression of the fruits of the electronic surveillance at the Manzo home on the ground that the agents failed to properly minimize the interception of nonpertinent conversations. Defendant Frank Manzo has standing to raise a minimization challenge to these surveillances. See United States v. Fury, 554 F.2d 522, 526 (2d Cir. 1977) (minimization claim can be raised only by one with a privacy interest in the place of surveillance), cert. denied, 436 U.S. 931, 56 L. Ed. 2d 776, 98 S. Ct. 2831 (1978).
Defendants contend that the agents intercepting conversations through the bugs of the Manzo home engaged in "live monitoring," which is the practice of listening to conversations without recording them. Defendants also point to several allegedly improper interceptions as evidence of a general disregard of both Title III, 18 U.S.C. §§ 2510-2520, and of the terms of the court orders permitting the surveillance. They seek suppression of all fruits of the bugs (which would, they allege, include the wiretap and its fruits) or, in the alternative, a hearing to further investigate their minimization claims.
18 U.S.C. § 2518(5) provides, in pertinent part:
Every order and extension thereof shall contain a provision that the authorization to intercept shall be conducted in such a way as to minimize the interception of communications not otherwise subject to interception under this chapter .
In addition, the orders authorizing the bugs each contained the following provision:
[N]o interception of oral communications shall occur during periods when it is determined that none of the subjects of this Order . . . are at the above described premises, and . . . no interception of oral communications shall take place, even when [the subjects] are at the above described premises, if the conversation is non-criminal in nature.
"[D]etermining the adequacy of minimization measures 'requires an evaluation of the reasonableness of the actual interceptions in light of the purpose of the wiretap and the totality of the circumstances before any inquiry is made into the subjective intent of the agents conducting the surveillance.'" United States v. Ianniello, 621 F. Supp. 1455, 1469 (S.D.N.Y. 1985) (quoting Scott v. United States, 436 U.S. 128, 131, 56 L. Ed. 2d 168, 98 S. Ct. 1717 (1978)).
Courts have isolated several factors in assessing the reasonableness of minimization efforts. For example, minimization may be more difficult, and more extensive surveillance may therefore be permitted, if: 1) the investigation focuses on a widespread conspiracy, see Scott v. United States, supra, 436 U.S. at 140; United States v. Napolitano, 552 F. Supp. 465, 476 (S.D.N.Y. 1982); 2) the nature of the conversations or the alleged crimes makes it difficult to determine pertinence, see United States v. Hinton, 543 F.2d 1002, 1012 (2d Cir.), cert. denied, 429 U.S. 980, 97 S. Ct. 493, 50 L. Ed. 2d 589 (1976); United States v. Lilla, 534 F. Supp. 1247, 1267 (N.D.N.Y. 1982), rev'd in part on other grounds, 699 F.2d 99 (2d Cir. 1983); United States v. Bynum, 360 F. Supp. 400, 410 (S.D.N.Y.), aff'd, 485 F.2d 490 (2d Cir. 1973), vacated on other grounds, 417 U.S. 903, 94 S. Ct. 2598, 41 L. Ed. 2d 209 (1974); or 3) the targets use jargon or code words or speak in a foreign language, see United States v. Hinton, supra, 543 F.2d at 1012; United States v. Lilla, supra, 534 F. Supp. at 1268; United States v. Cale, 508 F. Supp. 1038, 1041 (S.D.N.Y. 1981). In addition, the agents may have more leeway at the start of a surveillance when they are less familiar with the subjects. See United States v. Scott, supra, 436 U.S. at 141; United States v. Napolitano, supra, 552 F. Supp. at 476.
In addition, courts have identified several measures which, if taken by the government, make a finding of compliance with § 2518(5) more likely. These include: 1) maintenance of monitoring logs, see United States v. Hinton, supra, 543 F.2d at 1012; United States v. Rizzo, 491 F.2d 215, 217 (2d Cir.), cert. denied, 416 U.S. 990, 40 L. Ed. 2d 769, 94 S. Ct. 2399 (1974); 2) judicial supervision of the progress of the surveillance, see United States v. Bynum, supra, 360 F. Supp. at 410; and 3) supervision by the prosecutor, see United States v. Rizzo, supra, 491 F.2d at 217; United States v. Bynum, supra, 360 F. Supp. at 410. The fact that no privileged conversations were recorded may also show that the agents have abided by the statute and orders. See United States v. Rizzo, supra, 491 F.2d at 217.
Actual evidence of minimization by the monitoring agents can be gleaned by scrutinizing
inter alia, the type of criminal enterprise being investigated; the scope of that enterprise and the number of participants, known and unknown, involved therein; the number of days for which electronic surveillance is conducted; the scope of the authorizing order; the activity [in] the [premises] being monitored; the number of [conversations]; the number of monitored [conversations]; the location of the [bugs]; the length of [conversations]; the participants in those [conversations]:, the content of [conversations] as reasonably perceived at the time of [interception]; the experience of the agents deployed for the investigation; the various pressures on the agents executing the investigation; the procedures planned and/or followed to monitor [interceptions]; the equipment employed in the surveillance; and, most of all, the supervision of the interception by the investigating agency, the supervising attorney, and by the authorizing Court.
United States v. Bynum, supra, 360 F. Supp. at 410.
Having reviewed the affidavits, the monitoring logs, the reports submitted to the supervising judges, and the instructions given to the agents, and having evaluated those documents in light of the principles discussed above, I conclude that the government has made a prima facie showing of compliance with both § 2518(5) and the court orders.
First of all, several procedures designed to ensure proper minimization were established. The agents were instructed by their supervisor on the maintenance of accurate logs and by an Organized Crime Strike Force attorney on the legal requirements for minimization of irrelevant interceptions. It was made clear that there was to be no monitoring without recording and that there was to be no automatic recording. Each agent was required to read all instructions, court orders and applications, and copies of each were posted in the monitoring plant. In addition, the prosecutors personally delivered weekly progress reports to the supervising judges.
Moreover, minimization was complicated by the nature of the surveillance. The target premises was a residence used as an office; thus, relevant conversations were not confined to particular areas or times of day. Manzo speaks heavily accented English and often conversed in Italian, and interceptions were frequently obscured by television noise or music. The enterprise being investigated involved many known and unknown parties and various criminal activities.
These factors made it difficult to tell whether a conversation was pertinent, but it appears that the agents complied as best they could with their minimization obligations. The logs reveal that listening ceased once it was determined that the interception was irrelevant. The majority of interceptions appear to be one- to three-minute spot checks that took place ten to thirty minutes apart.
Because I find that the conduct of the surveillance in this case was reasonable under the circumstances, the government has met its burden of demonstrating the adequacy of its minimization measures. The evidence before me indicates that "the agents comprehended and conscientiously attempted to fulfill their responsibility to minimize the intrusion upon communications not subject to the surveillance order.".United States v. Ianniello, supra, 621 F. Supp. at 1470. Accordingly, no hearing is warranted unless defendants can demonstrate "that a substantial number of nonpertinent conversations [were] intercepted unreasonably." United States v. Cirillo, 499 F.2d 872, 881 (2d Cir.), cert. denied, 419 U.S. 1056, 42 L. Ed. 2d 653, 95 S. Ct. 638, 95 S. Ct. 639 (1974); see United States v. Ramirez, 602 F. Supp. 783, 791 (S.D.N.Y. 1985). This they have failed to do.
Defendants' claim of live monitoring is based on speculation as to how the equipment may have been set up. Their claim that the monitoring records have been falsified is based on alleged discrepancies in the logs between the number of minutes a conversation took and the amount of tape it took to record it, but they point to no specific conversations or log entries, despite having had the opportunity to submit a reply to the government's opposition to their motions. They do point to certain conversations as illustrative of a pattern of the monitoring of irrelevant discussions, but the explanations provided by the government satisfy me that those interceptions were proper.
"It is virtually impossible to completely exclude all irrelevant matter from intercepted conversations," United States v. Rastelli, No. 85 CR 354, slip op. at 40 (E.D.N.Y. Feb. 27, 1986) (quoting United. States v. Schwartz, 535 F.2d 160, 164 (2d Cir. 1976), cert. denied, 430 U.S. 906, 51 L. Ed. 2d 581, 97 S. Ct. 1175 (1977)), and indeed "[t]he statute does not forbid the interception of all nonrelevant conversations, but rather instructs the agents to conduct the surveillance in such a manner as to 'minimize' the interception of such conversations," United States v. Scott, supra, 436 U.S. at 140.
Because I find that the government has made a prima facie showing of compliance with the § 2518(5) and the court orders, and because defendants have failed to demonstrate a substantial number of unreasonable interceptions or any other reason to doubt the good faith of the government, see United States v. Ianniello, supra, 621 F. Supp. at 1470-71, the motion to suppress, or in the alternative for a hearing, is denied.
C. Audibility Hearing
Defendants have demanded an audibility hearing in order to obtain pre-trial rulings on the admissibility of the tapes the government intends to offer into evidence. The government has not yet decided exactly which tapes it will use, but has agreed to do so within a reasonable time. Once that is accomplished, the Court will schedule hearings to rule on the admissibility of any portions of the tapes on which the parties cannot agree.
Defendants argue that the fruits of the tap of the Manzo phone and the bug of the Manzo home must be suppressed because the government failed to have the tapes sealed in a timely manner.
The relevant statute, 18 U.S.C. § 2518(8)(a), requires that the fruits of an electronic surveillance order be turned over to the issuing judge for sealing "[i]mmediately upon the expiration of the period of the order." The presence of a seal, or a satisfactory explanation for its absence, is a prerequisite to the admission into evidence of such tapes. Id. Our prior cases have established that when the sealing is not done immediately, the government must provide a satisfactory explanation for the delay, even if a seal is present at the time the tape is sought to be introduced. United States v. Vazquez, 605 F.2d 1269, 1274 (2d Cir.) cert. denied, 444 U.S. 981, 100 S. Ct. 674, 62 L. Ed. 2d 649 (1979); United States v. Gigante, 538 F.2d 502, 506 (2d Cir. 1976). Any delay beyond two days triggers the satisfactory explanation requirement. Vasquez, 605 F.2d at 1278.
United States v. Massino, 784 F.2d 153, 156 (2d Cir. 1986) (footnote omitted). "The judicial sealing requirement . . . provides an external safeguard against tampering with or manipulation of recorded evidence." United States v. Gigante, supra, 538 F.2d at 505. The obligation to present the tapes for sealing does not arise, however, until the wiretap order and any extensions thereof have expired. See 18 U.S.C. § 2518(8)(a) (tapes to be sealed "[i]mmediately upon the expiration of the period of the order, or extensions thereof . . .").
The following charts show when the surveillances in this case were ordered, when those orders expired, and when the tapes were sealed:
Order Signed Expired Sealed
1 5/3/83 6/2/83 6/3/83
2 6/13/83 7/13/83 7/15/83
3 7/13/83 8/12/83 8/15/83
4 8/12/83 9/11/83 9/12/83
5 9/14/83 10/14/83 10/17/83
Order Signed Expired Sealed
1 7/22/83 8/21/83 8/23/83
2 8/19/83 9/18/83 9/19/83
3 9/19/83 10/19/83 10/20/83
The government's explanation obligation is triggered by a delay of more than two days, see United States v. Vasquez, supra, 605 F.2d at 1278, and here there are only two such instances.
Moreover, if the subsequent orders are extensions of the first, the two-days-or-explain test is applied only to the last sealing in the series.
[T]he term "extensions," as used in the phrase "period of the order, or extensions thereof" is to be understood in a common sense fashion as encompassing all consecutive continuations of a wiretap order, however designated, where the surveillance involves the same telephone, the same premises, the same crimes, and substantially the same persons.
Id. A review of the bug orders reveals that all involved the exact same location, identical offenses, and substantially the same targets.
The same is true of the tap orders.
Each set of orders thus constitutes a "continuous authorized [surveillance]," id. at 1277, so the obligation to seal the tapes arose upon the expiration of the last order in each series.
The final tap order expired on October 19, 1983, and the tapes were presented to this Court on October 20, 1983. Defendants cannot reasonably expect sealing to take place any more "immediately" than that. The final bug order expired on October 14, 1983, a Friday. They were sealed by Judge Glasser on Monday, October 17, 1983. In light of the statutory requirement that the sealing be done by the judge who issued the order, see 18 U.S.C. § 2518(8)(a), and appreciating the logistical difficulties of getting orders signed on weekends, the sealing was accomplished as immediately as was possible.
Even if the intervening weekend means that the sealing was not immediate within the meaning of the. statute, I am satisfied by the government's explanation for the delay.
[T]he factors considered in assessing the acceptability of the explanation have included the length of the delay, . . .; the amount of time need to prepare the tapes for sealing, . . .; the diligence of law enforcement personnel in performing the necessary pre-presentment tasks, . . .; the foreseeability and urgency of circumstances diverting the attention and energies of those responsible for the presentation of the tapes to other matters, . . .; evidence of any tampering with the tapes or of any other prejudice to the defendants, . . .; and any evidence of bad faith on the part of law enforcement agencies, such as "any intent to evade statutory sealing requirements or to gain any tactical advantage," . . . .
In most cases When (1) the government has advanced reasons for the delay, such as the need to perform administrative tasks relating to the tapes prior to sealing, (2) there is no basis for inferring that the government sought by means of the delay to gain a tactical advantage over the defendant or that it had any other improper motive, and (3) there has been no showing that there has been tampering with the tapes or that the defendant has suffered any other prejudice as a result of the delay, the government's explanation has been accepted as satisfactory.
United States v. Rodriguez, 786 F.2d 472, slip op. at 1892-93 (2d Cir. 1986). There is no indication here that the government was anything other than conscientious in executing its sealing duties, nor is there any sign of prejudice to the defendants. The two-day absence of the issuing judge is more than sufficient to excuse such a brief delay.
Even if the individual orders are not regarded as extensions, and each was therefore subject to the immediate sealing requirement, there would be no reason to suppress the tapes. Six of the eight sets of tapes were sealed within two days, and two were sealed on the first Monday after the Friday the orders expired. If an explanation is needed for any of these so-called delays, the performance of the administrative tasks (such as transportation and duplication of the tapes and preparation of boxes and paperwork) required to ready the tapes for sealing is more than sufficient to justify these short intervals. See United States v. Persico, supra, 621 F. Supp. at 866 ("[D]elays of three or four days in sealing . . . are excusable. Short delays of this kind have rarely compelled suppression.") (collecting cases).
Defendants would have the Court read the term "immediately" in § 2518(8)(a) as requiring that tapes be sealed the instant the authorizing order expires. As the case law in this Circuit makes clear, such an approach is. neither mandated nor practicable. The government proceeded quickly and diligently to have the tapes sealed, and the statute demands no more than that. Accordingly, the motion to suppress is denied.
II. The Mail Fraud Count
Defendants have moved to dismiss Count Twenty-three, which charges Frank Manzo, Leone Manzo, Paul Vario and William Barone with mail fraud in connection with the purchase of $250,000 worth of bonds issued by Sullivan County, New York. Specifically, the government alleges that the defendants used the mails to conceal the source of the cash used to buy the bonds and the fact that it was the defendants who were the buyers. They did so, the government charges, by causing the bonds to be purchased through intermediaries. The mailing charged in the indictment took place when Barone returned to the bond broker's auditor an account statement that showed Barone as the buyer of the bonds; Barone noted on the form that the transaction was in error. The broker subsequently amended Barone's statement to delete the bond transaction.
18 U.S.C. § 1341 makes it a crime to use the mails to further a "scheme or artifice to defraud."
The entity that has been defrauded, according to the indictment, is the United States government, which has allegedly been deprived of its "ability to gather information required to be kept by [the broker] pursuant to the [securities laws]" (Count 23, P 4). In short, the government charges the defendants with mail fraud for having provided inaccurate information to a brokerage firm, which, in carrying out its statutory disclosure obligations, in turn provided inaccurate information to the government. This theory on its face seems attenuated, and an analysis of the mail fraud statute and cases confirms that while the wrongful conduct alleged might well constitute a violation of various federal statutes,
it does not constitute mail fraud.
To prove a violation of § 1341, the government must establish that the defendant participated in a scheme to defraud and that postal channels were used to further that scheme. Pereira v. United States, 347 U.S. 1, 8, 98 L. Ed. 435, 74 S. Ct. 358 (1954); United States v. Corey, 566 F.2d 429, 430 n.2 (2d Cir. 1977). There are two types of schemes to defraud: those which cause the victim economic loss and those which deprive the victim of intangible rights. United States v. Richter, 610 F. Supp. 480, 494 (N.D. Ill. 1985), aff'd mem. sub nom. United States v. Mangovski, 785 F.2d 312 (7th Cir. 1986); see United States v. Weiss, 752 F.2d 777, 784 (2d Cir. 1985), cert. denied, 474 U.S. 944, 106 S. Ct. 308, 88 L. Ed. 2d 285 (1985). In this case the government alleges that the defendants defrauded it of its intangible right to receive accurate information from the broker.
The defendants argue that they cannot be held liable for a deprivation of an intangible right in the absence of a fiduciary duty owed to the victim. In other words, they contend that they can be convicted of mail fraud only if they had a fiduciary duty to provide the accurate information of which the government was allegedly deprived. Because no such duty exists here -- it is the broker who is obligated by the securities laws to disclose transactions to the government -- they argue that they cannot be liable for mail fraud. Although their statement of the law is not quite accurate, their conclusion is correct.
It is true that many intangible rights mail fraud cases involve defendants who owe a fiduciary duty to the defrauded party, see, e.g., United States v. Newman, 664 F.2d 12, 19-20 (2d Cir. 1981) (employer/employee); United States v. Dorfman, 532 F. Supp. 1118, 1123 (N.D. Ill. 1981) (pension fund trustee), and indeed one court has held that the existence of such a duty is required in a mail fraud prosecution based on a deprivation-of-intangible-rights theory, see United States v. Richter, supra, 610 F. Supp. at 494-95.
The government responds by citing several cases in which a defendant has been found to have defrauded the United States in the absence of a fiduciary relationship. See, e.g., United States v. Southland Corp., 760 F.2d 1366, 1382 (2d Cir.), cert. denied, 474 U.S. 825, 106 S. Ct. 82, 88 L. Ed. 2d 67 (1985); United States v. Puerto, 730 F.2d 627, 630-31 (11th Cir.), cert. denied, 105 S. Ct. 162 (1984). Those cases, however, arise not under the mail fraud statute, but under 18 U.S.C. § 371, which proscribes conspiracy to defraud the United States.
It is well settled that "fraud" for purposes of § 371 "is not confined to fraud as that term has been defined in the common law," Dennis v. United States, 384 U.S. 855, 861, 16 L. Ed. 2d 973, 86 S. Ct. 1840 (1966), and that that section reaches "'any conspiracy for the purpose of impairing, obstructing, or defeating the lawful function of any department of government,'" id. (quoting Haas v. Henkel, 216 U.S. 462, 479, 54 L. Ed. 569, 30 S. Ct. 249 (1910)); see Hammerschmidt v. United States, 265 U.S. 182, 188, 68 L. Ed. 968, 44 S. Ct. 511 (1924). This is a broad standard, and there is no requirement that there be any duty owed the government by the defendant. See United States v. Richter, supra, 610 F. Supp. at 495. A defendant can interfere with a governmental function by concealing information even if he has no direct duty to disclose it, if he conceals it from an entity that he knows does have a duty to disclose it. See United States v. Puerto, supra, 730 F.2d at 633 (§ 371 violation where defendant structured deposit so that bank would not file with government reports required for currency transactions in excess of $10,000; defendant defrauded government by obstructing its function of receiving accurate reports); United States v. Richter, supra, 610 F. Supp. at 486 (same).
It has never been held, however, that conduct that defrauds the United States under the broad § 371 standard of interference with a governmental function constitutes a "scheme to defraud" for purposes of the mail fraud statute, 18 U.S.C. § 1341; and the government has pointed to no case that would support such a proposition. Nor has it directed the Court to a § 1341 prosecution for concealing information
in which the defendant did not have a duty to disclose.
The government disputes defendants' claim that that duty must be of the fiduciary variety, and one court has agreed with that position, see United States v. Dowling, 739 F.2d 1445, 1449 (9th Cir. 1984), rev'd in part on other grounds, 473 U.S. 207, 105 S. Ct. 3127, 87 L. Ed. 2d 152 (1985). That court, however, did not accept the government's broad argument that the duty the breach of which creates mail fraud is simply the duty not to commit an illegal act. See id. ("[T]he presence of illegal conduct alone may [not] constitute the basis of the 'fraud' element of a mail fraud prosecution."). Rather, it held that nondisclosure constitutes fraud "only . . . where there exists an independent duty" to disclose. Id. That independent duty may arise from a fiduciary relationship or an explicit statutory requirement. Id.; see, e.g., United States v. Siegel, 717 F.2d 9 (2d Cir. 1983) (executive's mail fraud conviction based on breach of fiduciary duty owed to corporation and shareholders); United States v. Margiotta, 688 F.2d 108 (2d Cir. 1982) (political official's mail fraud conviction based on breach of fiduciary duty owed to public), cert. denied, 461 U.S. 913, 77 L. Ed. 2d 282, 103 S. Ct. 1891 (1983); United States v. Brewer, 528 F.2d 492 (5th Cir. 1975) (mail fraud conviction based on violation of statutory duty to file truthful tax returns).
Where the statute violated is not explicitly applicable to the defendant, there is no breach of duty that would support a mail fraud charge. United States v. Dowling, supra, 739 F.2d at 1449-1450; see United States v. Gallant, 570 F. Supp. 303, 308 (S.D.N.Y. 1983) ("In order to successfully maintain a mail fraud prosecution under the Second Circuit rule [in a concealment case], the government must prove that the defendant breached [an explicit] duty to disclose separate from the commission of an otherwise criminal act."); see also United States v. Bronston, 658 F.2d 920, 926 (2d Cir. 1981) (indicating in dictum that mail fraud prosecution should not lie "on the basis of a breach of . . . duty accompanied by little more than a failure to disclose the breach to the person to whom the duty was owed . . ."), cert. denied, 456 U.S. 915, 72 L. Ed. 2d 174, 102 S. Ct. 1769 (1982).
In this case, the information of which the government was supposedly deprived is information that the broker is obligated to provide (Count 23, P 4 (United States defrauded of ability to gather "information required to be kept by [the broker]")). There is no explicit statutory obligation on the part of the buyer of a bond to provide information to the government, nor is a fiduciary relationship present. Thus, because there is no independent duty to disclose, there is no breach of duty that can support a mail fraud prosecution for concealment. The defendants may have interfered with a governmental function in violation of § 371, they may have breached the disclosure laws themselves, and they may have concealed a material fact within the jurisdiction of a government agency in derogation of 18 U.S.C. § 1001,
but they have not committed mail fraud.
This raises an obvious question: Why did the government not charge defendants with any of the various crimes that seem to be more directly implicated by the behavior alleged in the indictment? The probable answer: because none of those crimes is a RICO predicate offense, and mail fraud is, see 18 U.S.C. § 1961(1).
This emphasizes the danger in interpreting the mail fraud statute as the government would like. The principle that criminal laws are to be strictly construed, see United States v. Enmons, 410 U.S. 396, 411, 35 L. Ed. 2d 379, 93 S. Ct. 1007 (1973), which counsels against expansion of the mail fraud statute, is even more egregiously offended when that expansion would also subject the defendants to a RICO prosecution. See Spiegel v. Continental Ill. Bank, 609 F. Supp. 1083, 1089 (N.D. Ill. 1985). Here the government is attempting to bootstrap defendants' conduct not only into a mail fraud. offense, see United States v. Gallant, supra, 570 F. Supp. at 309, but also into a RICO violation.
If the Court were to accept the government's theory, "any crime . . . could supply the 'fraud' element of a mail fraud violation," id.; see United States v. Dowling, supra, 739 F.2d at 1450, and any crime involving the mails would become a RICO predicate. If Congress had so intended, it would not have limited liability under both statutes to fraud involving the mails. Accordingly, because the conduct charged does not constitute mail fraud, Count Twenty-three must be dismissed.
III The Securities Fraud Counts
Defendants raise several objections to those portions of the indictment that charge violations of the anti-fraud provisions of the securities laws. Count Eight charges six defendants with conspiring to violate 15 U.S.C. § 78j(b) ("§ 10(b)")
and 17 C.F.R. § 240.10b-5 ("Rule 10b-5"),
and Counts Nine through Fifteen charge substantive violations of those provisions. The government alleges that John Russo, a vice-president of Air Express International Corp. ("AEI"), misappropriated from his company confidential information relating to its proposed merger with Consolidated Freightways, Inc. ("CF"). He allegedly passed this information on to his co-defendants, who used it in engaging in stock transactions.
The first challenge is raised by defendant Calise. He alleges that he cannot be held liable for either conspiracy or any substantive crime because it is not alleged that he personally traded in AEI stock on the basis of inside information. All six defendants object to Counts Nine through Fifteen, which charge, in chart form, the seven transactions that are alleged to constitute the substantive violations. They argue that six defendants cannot be liable for a trade that is made in the name of only one person. Finally, all defendants seek dismissal of Counts Eight through Fifteen on the ground that the government will not be able to present evidence sufficient to sustain convictions on any of the securities charges.
Calise's theory appears to be that he has not been charged with a crime because he is not named in any of the overt acts contained in Count Eight. The indictment clearly alleges that Russo disclosed material nonpublic information to "his co-defendants and co-conspirators" -- a group that would include Calise -- but because the overt acts listed include trades by all defendants except Calise, he argues that he cannot be found to have violated his duty not to trade on the basis of inside information.
Defendant Calise misperceives both the basis of Count Eight -- it charges conspiracy -- and the nature of the overt acts alleged therein. Count Eight states that the defendants violated 18 U.S.C. § 371
by conspiring to violate the anti-fraud provisions of the securities laws. The charge is sufficient if the offense the defendants are alleged to have conspired to commit is sufficiently identified, see Wong Tai v. United States, 273 U.S. 77, 81, 71 L. Ed. 545, 47 S. Ct. 300 (1927), and one overt act in furtherance of the conspiracy is alleged. There is no requirement that every overt act committed be alleged, United States v. Lam Lek Chong, 544 F.2d 58, 63 (2d Cir. 1976), cert. denied, 429 U.S. 1101, 97 S. Ct. 1124, 51 L. Ed. 2d 550 (1977), or that every conspirator be alleged to have committed an overt act, United States v. Brown, 335 F.2d 170, 172 (2d Cir. 1964). Accordingly, as long as the indictment properly charges that each defendant knowingly and willfully participated in a scheme to violate the securities laws and that one defendant committed an overt act in furtherance of that conspiracy, the fact that Calise is not named in any overt act is irrelevant.
The government's theory is that Russo -- the insider/tipper -- transferred to the other defendants -- the tippees -- material confidential information upon which the latter traded.
In Cady, Roberts & Co., 40 S.E.C. 907 (1961), the [Securities and Exchange] Commission decided that a corporate insider must abstain from trading in the shares of his corporation unless he has first disclosed all material inside information known to him.
The Commission emphasized that the duty arose from (i) the existence of a relationship affording access to inside information intended to be available only for a corporate purpose, and (ii) the unfairness of allowing a corporate insider to take advantage of that information by trading without disclosure. Id., at 912, and n.15.
Chiarella v. United States, 445 U.S. 222, 227, 63 L. Ed. 2d 348, 100 S. Ct. 1108 (1980) (footnote omitted). In Dirks v. S.E.C., 463 U.S. 646, 77 L. Ed. 2d 911, 103 S. Ct. 3255 (1983), the Court made clear that "the tippee's duty to disclose or abstain is derivative . . . of the insider's duty." Id. at 659.
As we noted in Chiarella, "[t]he tippee's obligation has been viewed as arising from his role as a participant after the fact in the insider's breach of a fiduciary duty." 445 U.S., at 230, n.12, 100 S. Ct., at 1115, n.12.
Thus, some tippees must assume an insider's duty to the shareholders not because they receive inside information, but rather because it has been made available to them improperly. And for Rule 10b-5 purposes, the insider's disclosure is improper only where it would violate his Cady, Roberts duty. Thus, a tippee assumes a fiduciary duty to the shareholders of a corporation not to trade on material nonpublic information only when the insider has breached his fiduciary duty to the shareholders by disclosing the information to the tippee and the tippee knows or should know that there has been a breach.
Dirks v. S.E.C., supra, 463 U.S. at 659-60 (footnotes omitted). The insider breaches his fiduciary duty if he "will benefit, directly or indirectly, from his disclosure." Id. at 662.
When the indictment is viewed in light of these principles, it is clear that it properly sets forth the elements of tipper and tippee liability. Count Eight alleges that the defendants agreed to violate the securities laws by trading on the basis of inside information. Russo is alleged to be the tipper, who, for personal benefit, violated his fiduciary duties by disclosing to the other defendants confidential information about the AEI/CF merger. The tippees are alleged to have then engaged in various stock transactions, knowing that Russo had supplied the information in breach of his duties to AEI. This conduct, all of which is alleged to have been undertaken "unlawfully, willfully and knowingly,"
is alleged to constitute a scheme which operated as a fraud and deceit on AEI and its directors, officers and shareholders. The indictment thus sufficiently charges conspiracy to violate § 10(b) and Rule 10b-5 and substantive violations of those provisions.
Defendants next argue, citing State Teachers Retirement Board v. Fluor Corp., 592 F. Supp. 592 (S.D.N.Y. 1984), that the indictment is defective in that it fails to allege that the tippees knew that the tipper acted for personal benefit. Fluor Corp., 592 F. Supp. at 594, analyzed the two requirements for tippee liability after Dirks v. S.E.C., supra, 463 U.S. 646: 1) that the tipper has breached his duty to the shareholders of the company; and 2) that the tippee knows or has reason to know of the tipper's breach.
A tipper breaches his duty if he transfers material nonpublic information for personal benefit. Dirks v. S.E.C., supra, 463 U.S. at 662. For the tippee to know of the tipper's breach, therefore, the tippee must know that the tipper has transferred information, that that information is material and nonpublic, and that the tipper has done so for personal benefit. See State Teachers Retirement Board v. Fluor Corp., supra, 592 F. Supp. at 594 (tippee must know "of each element of the tipper's breach") (emphasis in original).
But none of this helps the defendants to establish the invalidity of the indictment. Fluor Corp. 's determination that the tippee must know of each component of the tipper's breach arose in the context of a dispute over the proper jury charge in a Rule 10b-5 case. It was and is undisputed that knowledge of the breach, as an element of the offense, must be alleged in the indictment; Fluor Corp. merely held that knowledge of personal benefit, as an element of knowledge of the breach, must be explained to the jury. But nowhere in that case did Judge Sweet hold that the personal gain sub-element of the breach element, or the tippee's knowledge thereof, must be laid out separately in the indictment.
The indictment here states that Russo knowingly breached his duty, explains how, and alleges that the tippee defendants knew he had done so. That it does not explicitly define that breach of duty as disclosure of inside information for personal gain is of no moment. The indictment apprises defendants of the tippee-knowledge-of-tipper-breach element of the offense, see generally Russell v. United States, 369 U.S. 749, 762-69, 8 L. Ed. 2d 240, 82 S. Ct. 1038 (1962), and the government will have to prove each component of that element at trial. But the indictment need not define every legal term contained therein; an indictment is not a jury charge. An allegation that the tippee knew of the tipper's breach necessarily charges that the tippee knew that the tipper was acting for personal gain.
Each defendant next objects to being charged with a substantive violation based on a sale that, as a matter of public record, was made by only one person.
They overlook, however, the fact that the indictment charges all of them with aiding and abetting the crime. See 18 U.S.C. § 2.
It is well settled that the guilt of a defendant may be established without proof that he personally did every act constituting the offense charged.
To convict a defendant as an aider and abettor the Government must show only "that he in some sort associate himself with the venture, that he participate in it as in something that he wishes to bring about, that he seek by his action to make it succeed." United States v. Peoni, 100 F.2d 401, 402 (2d Cir. 1938).
United States v. Perry, 643 F.2d 38, 46 (2d Cir.), cert. denied, 454 U.S. 835, 102 S. Ct. 138, 70 L. Ed. 2d 115 (1981). That the allegedly fraudulent sales were not made in the name of each defendant is irrelevant where, as here, the defendants are charged with willfully and knowingly violating the securities laws and aiding and abetting in the violation of the securities laws in that, in employing schemes to defraud and engaging in fraudulent practices, they caused the sales to be executed.
The next contention is that Counts Eight through Fifteen should be dismissed because defendants anticipate that the government will be unable to present sufficient evidence to sustain the charges. Their position appears to be that the alleged inside information upon which the securities fraud violations are based was not in fact confidential. Defendants focus on the claim of Teamsters Locals 851 and 295 that the unions had a right to veto the proposed AEI/CF merger, and assume the insider tip from Russo to be that if that claim went to arbitration, AEI stock would go down. That statement was also made by an AEI attorney in open court during the course of proceedings regarding a clause in the collective bargaining agreement giving the Locals the right to veto any merger or acquisition by AEI. Defendants thus argue that that information, as well as other information regarding the progress of the merger and the litigation, was publicly available, and that they therefore cannot be liable for insider trading.
Defendants' blithe assumptions about the nature of the inside information supplied by Russo unilaterally narrow the scope of the indictment. The government's proffer makes clear that it intends to prove that Russo knowingly disclosed to the other defendants a substantial amount of confidential information relating to various aspects of the proposed merger and the litigation it spawned, and that the defendants knowingly analyzed that information, traded accordingly, and sought to accomplish those transactions free of government scrutiny.
Defendants' belief that the government will not be able to prove that the information upon which the trades were made was in fact confidential is irrelevant in light of the well-settled principle that "[a]n indictment returned by a legally constituted and unbiased grand jury . . ., if valid on its face, is enough to call for trial of the charge on the merits." Costello v. United States, 350 U.S. 359, 363, 100 L. Ed. 397, 76 S. Ct. 406 (1956).
[This motion does] not challenge the facial validity of the indictment, see, Fed.R.Cr.P. 12(b)(2), but rather attempt[s] to bring a motion pursuant to Fed.R.Cr.P. 29 before the government has presented its case. The motions are therefore premature and must be denied. See United States v. Shakur, 560 F. Supp. 366, 371 (S.D.N.Y. 1983); United States v. Cafaro, 480 F. Supp. 511, 520 (S.D.N.Y. 1979). A motion to dismiss for insufficient evidence can be decided only at trial, after the government has been put to its test, not before trial, based merely on assumptions of what the government's proof will be.
United States v. Massino, 605 F. Supp. 1565, 1581 (S.D.N.Y. 1985), rev'd in part on other grounds, 784 F.2d 153 (2d Cir. 1986).
Accordingly, for the reasons stated above, the motions to dismiss Counts Eight through Fifteen are denied.
IV. Grand Jury Matters
Defendants have made several motions relating to the events before the grand jury that voted this indictment. They first suggest generally that prosecutors abuse grand jury proceedings, and accordingly seek a variety of information relating to the presentation to the grand jury in this case. Their requests cover twenty categories and call for virtually everything but the testimony itself.
"Disclosure . . . of matters occurring before the grand jury may [be ordered by the Court] upon a showing [by defendant] that grounds may exist for a motion to dismiss the indictment because of matters occurring before the grand jury." Fed. R. Crim. P. 6(e)(3)(c)(ii). There has been no showing whatsoever in this case. Defendants' hope that their inspection of grand jury materials may reveal an irregularity that might warrant a motion falls far short of the demonstration of "particularized need . . . or . . . some similar compelling necessity," United States v. Abrams, 539 F. Supp. 378, 388 (S.D.N.Y. 1982), that is required before grand jury secrecy will be disturbed. "Speculation and surmise as to what occurred before the grand jury is not a substitute for [the] factual basis [that must be] presented to warrant the extraordinary relief of disclosure of grand jury proceedings . . ." United States v. Wilson, 565 F. Supp. 1416, 1436 (S.D.N.Y. 1985).
The Court recognizes that there is something of a "Catch 22 implicit in [the] rule [that the defendant must] make a showing that grand jury proceedings were marred by irregularity . . ." Morvillo, Prosecutorial Power and The Grand Jury, N.Y.L.J., April 1, 1986; see United States v. Mechanik, 475 U.S. 66, 106 S. Ct. 938, 947, 89 L. Ed. 2d 50 (1986) . (Marshall, J., dissenting) ("[A] defendant often can make the necessary showing only with the aid of the materials he seeks to discover."). Nevertheless -- rightly or wrongly -- the courts have consistently held that conclusory or speculative allegations of misconduct do not outweigh the presumption of regularity of grand jury proceedings, see generally Costello v. United States, 350 U.S. 359, 100 L. Ed. 397, 76 S. Ct. 406 (1956); United States v. Gordon, 493 F. Supp. 814, 816-17 (N.D.N.Y. 1980), aff'd, 655 F.2d 478 (2d Cir. 1981), or the need for secrecy, see United States v. Beatty, 587 F. Supp. 1325, 1334-35 (E.D.N.Y. 1984); Pittsburgh Plate Glass Co. v. United States, 360 U.S. 395, 398-401, 3 L. Ed. 2d 1323, 79 S. Ct. 1237 (1959). See, e.g., United States v. Wilson, supra, 565 F. Supp. at 143; United States v. Gordon, supra, 493 F. Supp. at 816-17; United States v. Olin Corp., 465 F. Supp. 1120, 1134-36 (W.D.N.Y. 1979). It is not for a trial court to blaze a new trial around these precedents.
Accordingly, defendants are not at this time entitled to the information they seek, nor will the Court inspect the transcripts in camera. Grand jury materials will be turned over to defendants pursuant to the Jencks Act, 18 U.S.C. § 3500, and they can then make a motion if one is warranted.
Defendants' next request must be denied for similar reasons. They seek disclosure of the minutes on the ground that the grand jury may have been unnecessarily exposed to inflammatory statements regarding organized crime and the Lucchese Crime Family. Again, speculation regarding the grand jury presentation is insufficient to justify release of the transcripts. See, e.g., United States v. Kalevas, 622 F. Supp. 1523, 1525 (S.D.N.Y. 1985). Moreover, blanket condemnation of organized crime references as unnecessary is not appropriate in this case. The grand jury was investigating an alleged RICO enterprise said to be the Lucchese Family. It would thus not be improper for the prosecution to present evidence of the structure and activities of that organization. See Part V, infra.
Defendant Davidoff moves to have the indictment dismissed on the ground that the grand jury was given an incomplete and unfair description of the facts involved in the Unions' rejection of AEI/CF merger. He alleges that the jurors were never told that a clause in the collective bargaining agreement gave the unions the right to veto any merger or that that right had been upheld in court.
Davidoff's allegation is based on his analysis of the grand jury testimony of Joseph Mailman.
Obviously, however, Mailman's appearance constitutes only a fraction of the presentation. The contention that the prosecution nowhere apprised the grand jury of the pertinent facts is thus no more than "speculation and surmise," United States v. Wilson, supra, 565 F. Supp. at 143, and therefore does not justify even release of the minutes, let alone dismissal of the indictment.
Defendants' final contention regarding grand jury proceedings is that the government is using the continuing investigation in order to prepare for trial. It is true that it "is improper to utilize a Grand Jury for the sole or dominating purpose of preparing an already pending indictment for trial." United States v. Dardi, 330 F.2d 316, 336 (2d Cir.), cert. denied, 379 U.S. 845, 13 L. Ed. 2d 50, 85 S. Ct. 50 (1964); see 8 J. Moore, Federal Practice P 6.04 at 6-86 (2d ed. 1984) ("[I]t is not a legitimate function of the grand jury to serve as a substitute for pretrial discovery.").
In this case, however, there is no indication of any improper motive on the part of the government. An inference of bad faith might be warranted where, for example, the timing of a grand jury subpoena is suspicious, see, e.g., United States v. Dardi, supra, 330 F.2d at 336 (witness called before the grand jury during trial); United States v. Kovaleski, 406 F. Supp. 267, 269-70 (E.D.Mich. 1976) (witness called before grand jury after mistrial and prior to retrial), or when an inactive investigation is revived to question a particular witness, see In re Grand Jury Subpeona Duces Tecum Dated January 2, 1985 (Simels), 767 F.2d 26, 29 (2d Cir. 1985).
No such factors are present here. The grand jury is continuing its investigation of the air freight industry at JFK in a routine fashion, with an added inquiry into whether grand jury proceedings have been obstructed. There is nothing irregular in continuing to present evidence to a grand jury to determine whether superseding or additional indictments might be warranted. I am satisfied by the government's explanation that it is not "us[ing the] Grand Jury as a subterfuge to elicit testimony for use at . . . trial." United States v. Dardi, supra, 330 F.2d at 336. Accordingly, and in the absence of any indication to the contrary, the motion for an order precluding the use at trial of any evidence obtained through the continuing grand jury investigation is denied.
V. The RICO Conspiracy Count
Count One alleges a RICO conspiracy under 18 U.S.C. § 1962(d).
All defendants except Bono are charged with unlawfully, willingly and knowingly conspiring to conduct, and to participate directly and indirectly in the conduct of, the affairs of an enterprise -- The Lucchese Crime Family -- through a pattern of racketeering activity.
They object to Count One on several grounds.
Defendants first argue that the indictment fails to plead a pattern of racketeering activity
because it does not allege that the racketeering acts
are related to each other by a common scheme or plan. In other words, they contend that the indictment must charge not only that the acts of racketeering activity are related to the enterprise, but also that the acts are tied to one another in some way.
This construction of RICO has been rejected by the Second Circuit.
[T]he statutory language does not expressly require that the predicate acts of racketeering be specifically "related" to each other and we find no affirmative evidence in the legislative history from which we should infer such a requirement. Furthermore, the broad spectrum of predicate acts of racketeering enumerated in section 1961(1) belies any intent on the part of Congress to require that such predicate acts of racketeering must possess a unitary character. While we agree with [defendant] that RICO was not intended to apply to sporadic and unrelated criminal acts, see S.Rep.No.91-617, 91st Cong., 1st Sess., pp. 122, 158 (1970), we find that the statute was generally designed to avoid such an application. Most importantly, the predicate acts constituting a "pattern of racketeering activity" must all be done in the conduct of the affairs of an "enterprise." 18 U.S.C. § 1962(c). Thus, the enterprise itself supplies a significant unifying link between the various predicate acts specified in section 1961(1) that may constitute a "pattern of racketeering activity." See United States v. Elliott, 571 F.2d 880, 899 & n.23 (5th Cir.) [cert. denied, 439 U.S. 953, 99 S. Ct. 349, 58 L. Ed. 2d 344 (1978)].
United States v. Weisman, 624 F.2d 1118, 1122 (2d Cir.) (footnote omitted), cert. denied, 449 U.S. 871, 66 L. Ed. 2d 91, 101 S. Ct. 209 (1980).
The indictment here alleges that the defendants agreed to conduct the affairs of an enterprise by committing the predicate acts. That enterprise -- an organized crime family alleged to function by committing a variety of offenses -- is the link between the acts of racketeering activity. "This is pattern enough to satisfy the statute; indeed, it is the pattern that most influenced Congress' decision to adopt RICO." United States v. Castellano, 610 F. Supp. 1359, 1392 (S.D.N.Y. 1985).
Defendants also contend that the indictment does not allege the required nexus between the pattern of racketeering activity and the enterprise. See generally United States v. Turkette, 452 U.S. 576, 583, 69 L. Ed. 2d 246, 101 S. Ct. 2524 (1981) (government must establish existence of enterprise and connected pattern of racketeering activity). This assertion is puzzling. The indictment plainly states that the purpose of the enterprise was to make money and that the defendants conspired to accomplish that end by engaging in a pattern of racketeering activity.
This allegation is insufficient, defendants appear to suggest, because it would subject a person to RICO liability even for an illegal act in which he engaged solely to make money for himself. They assert that the government must establish that the acts of racketeering activity were intended to benefit the Lucchese Family as an entity.
To accept this proposition would eviscerate RICO. Defendants could escape liability in virtually every case, unless they were foolish enough to keep the proceeds of their criminal activity in a separate bank account in the name of the illegal enterprise. Surely Congress did not intend such a restrictive interpretation, see Organized Crime Control Act of 1970, Pub. L. No. 91-452, § 904, 84 Stat. 922, 947 (1970) (RICO "shall be liberally construed to effectuate its remedial purpose"), and defendants have cited no authority to support it.
No defendant need fear a RICO conviction based on crimes committed solely to benefit himself as an individual, as opposed to a participant in the enterprise. The allegation that the predicate acts were committed in order to effectuate the enterprise -- in other words, that the enterprise was conducted through the pattern of racketeering activity -- necessarily charges that the predicate acts were related to the enterprise. The government of course bears the burden of proving at trial that the defendants in fact agreed to conduct the affairs of The Lucchese Family by engaging in the pattern of racketee ground that the activities charged in Counts Four and Five are insufficiently related to the RICO conspiracy in Count One is denied for reasons stated in this section and in Part V supra. All other motions relating to the sufficiency of the trial evidence are denied as premature.
B. James Hearing
Defendants seek a pretrial hearing to determine the admissibility of any statements the government may offer into evidence as coconspirator hearsay under Fed. R. Evid. 801(d)(2)(E).
This procedure, which is the preferred (but not required) practice in some circuits, see United States v. Ammar, 714 F.2d 238, 246 (3d Cir.), cert. denied, 464 U.S. 936, 104 S. Ct. 344, 78 L. Ed. 2d 311 (1983); United States v. Montemayor, 703 F.2d 109, 116-17 (5th Cir.), cert. denied, 464 U.S. 822, 78 L. Ed. 2d 97, 104 S. Ct. 89 (1983); see generally United States v. James, 576 F.2d 1121, 1127-32 (5th Cir. 1978), modified, 590 F.2d 575 (5th Cir.) (en banc), cert. denied, 442 U.S. 917, 99 S. Ct. 2836, 61 L. Ed. 2d 283 (1979), has never been adopted by the Second Circuit.
That Court has made clear since United States v. Geaney, 417 F.2d 1116, 1120 (2d Cir. 1969), cert. denied, 397 U.S. 1028, 90 S. Ct. 1276, 25 L. Ed. 2d 539 (1970), that coconspirator "declarations that are otherwise hearsay may nonetheless be provisionally admitted pursuant to Rule 801(d)(2)(E))," United States v. Margiotta, 688 F.2d 108, 136 (2d Cir. 1982), cert. denied, 461 U.S. 913, 77 L. Ed. 2d 282, 103 S. Ct. 1891 (1983), "subject to the trial court's determination, made at the end of the government's case, that the non-hearsay evidence is sufficient, as to each conspirator against whom such statements are sought to be introduced, to show that he or she participated in the conspiracy," United States v. Ianiello, supra, 621 F. Supp. at 1478 (footnote omitted). I see no reason in this case to depart from this Circuit's settled procedure by conducting a mini-trial on coconspirator hearsay admissibility. Accordingly, the motion is denied.
The parties agree that the Court should make pretrial determinations as to the audibility and admissibility of the various tapes the government intends to introduce into evidence. The procedure shall be as follows. The government shall, within ten days of the date of this order, identify those portions of the tapes and transcripts it intends to use. The government shall make every effort to delete that which is obviously unfairly prejudicial, irrelevant, or meaningless. Within ten days of receiving this information from the government, defendants shall state, in writing and with particularity, their objections to the proffered evidence. If after informal consultation the parties cannot agree on deletions, they shall so notify the Court, and hearings will be scheduled, probably for the end of July. The same procedure shall be employed for any tapes the defendants intend to introduce.
D. Other Suppression Motions
Defendants have made a general request to suppress statements and physical evidence. They specify neither the items they seek to suppress nor the grounds on which suppression is sought. Subject to protective orders entered on April 16, 1985 and January 28, 1986, see Fed. R. Crim. P. 16(d)(1), the government has informed defendants of statements and physical evidence in its possession, see Fed. R. Crim. P. 16(a)(1). Defendants have nevertheless failed to make their motions with any specificity. Accordingly, the motions are denied. See United States v. Castellano, supra, 610 F. Supp. at 1429.
Defendants also move to suppress any identification testimony. The government has stated that defendants Raucci and Frank Manzo have each been identified from photographs.
The name of the witness who identified Manzo has not been disclosed, and the government has indicated that he may not even be called at trial. The witness who identified Raucci is known but lives on the west coast.
The government requests that any hearings regarding the photographic identifications be deferred until such time as the witnesses are to testify. Defendants have not objected to this reasonable and efficient procedure. Accordingly, the government's request is granted.
VIII. Motions Regarding Brady, Discovery and a Bill of Particulars
A. Brady Material
Defendants have made various requests for any and all materials which the government is obliged to provide under Brady v. Maryland, 373 U.S. 83, 10 L. Ed. 2d 215, 83 S. Ct. 1194 (1963), and its progeny, see United States v. Bagley, 473 U.S. 667, 105 S. Ct. 3375, 87 L. Ed. 2d 481 (1985). The Brady rule requires that the government disclose to the defendant material evidence in its possessio which is exculpatory or otherwise favorable to the defense. See United States v. LeRoy, 687 F.2d 610, 618 (2d Cir. 1982), cert. denied, 459 U.S. 1174, 103 S. Ct. 823, 74 L. Ed. 2d 1019 (1983). There is no requirement, however, that that disclosure be made before trial, United States ex rel. Lucas v. Regan, 503 F.2d 1, 3 n.1 (2d Cir. 1974), cert. denied, 420 U.S 939, 43 L. Ed. 2d 415, 95 S. Ct. 1149 (1975), nor does Brady create a general constitutional right to discovery, Weatherford v. Bursey, 429 U.S. 545, 559, 51 L. Ed. 2d 30, 97 S. Ct. 837 (1977). "The rationale underlying Brady is not to supply a defendant with all the evidence in the Government's possession which might conceivably assist the preparation of his defense, but to assure that the defendant will not be denied access to exculpatory evidence only known to the Government." United States v. LeRoy, supra, 687 F.2d at 619 (citation omitted).
The government states that it has provided and will continue to provide Brady material in a manner that will avoid delay at trial and will enable the evidence to be of use to defendants in trial preparation. Ordinarily, "the assurance by the government that it has in its possession no undisclosed evidence that would tend to exculpate defendant justifies denial of a motion for inspection that does not make some particularized showing of materiality and usefulness." United States v.. Evanchik, 413 F.2d 950, 953 (2d Cir. 1969) (citation omitted).
I have carefully reviewed the defendants' requests and the government's response, and conclude that at this time there is no reason either to doubt the good faith of the government or to order disclosure. The government has represented that it will continue to disclose Brady material as its exculpatory nature becomes apparent. If there is any Brady information of which the government is aware but which it has not turned over, or which it does not disclose upon becoming aware that the information is favorable to the defense, it shall inform the Court of the nature of the material and its reasons for withholding it, so that appropriate rulings can be made. The government is also encouraged to seek the Court's guidance if it is unsure whether evidence constitutes Brady material.
Defendants have made various motions pursuant to Fed. R. Crim. P. 16(a), (c) for discovery and inspection of evidence. The government has complied with many of the requests, has sought protective orders, see Fed. R. Crim. P. 16(d), with regard to others, and opposes the remainder. Certain categories of requests are briefly considered below.
Defendants wish the government to identify its trial witnesses. Under United States v. Cannone, 528 F.2d 296, 301-302 (2d Cir. 1975), the government's reasons for wanting to keep the information to itself must be balanced against defendants' specific showing of need for disclosure. Here the defense has made no such showing of particularized need; the "abstract, conclusory claim that [the witness list is] necessary to its proper preparation for trial," id., falls short of the Cannone standard. See United States v. Pastor, 419 F. Supp. 1318, 1330 (S.D.N.Y. 1975) (defense showing must be something more than " the obvious assertion that the [witness] list would facilitate preparation for trial").
There is thus nothing to balance against the government's claim that disclosure of the witness list is likely to result in subornation of perjury, obstruction of justice and witness intimidation. In light of the existence of such a risk, disclosure of government witnesses is not warranted. Defendants have in their possession sufficient information
to prepare for trial.
Defendants also want statements of unindicted coconspirators and trial witnesses. United States v. Percevault, 490 F.2d 126, 131 (2d Cir. 1974), makes clear that advance disclosure of these statements is not required. The government must, pursuant to the Jencks Act, 18 U.S.C. § 3500, turn over such statements after the witness testifies on direct at trial, but it is under no obligation to do so before that time. United States v. Sebastian, 497 F.2d 1267, 1269-70 (2d Cir. 1974). Professional courtesy would suggest, however, that the government ought to discharge this responsibility a reasonable time before trial.
The next request is for the testimony of grand jury witnesses. If any of them testify at trial, their prior testimony will be turned over as § 3500 material at that time. With regard to the rest of the testimony, the motion is denied under Fed. R. Crim. P. 6(e) and for reasons stated in Part IV supra.
Defendants next seek disclosure of the identities of any confidential informants and undercover agents involved in this case. The Supreme Court in Rovario v. United States, 353 U.S. 53, 77 S. Ct. 623, 1 L. Ed. 2d 639 (1957), noted that the government's privilege to withhold the identity of informants is not unlimited:
Where the disclosure of an informer's identity, or of the contents of his communication, is relevant and helpful to the defense of an accused, or is essential to a fair determination of a cause, the privilege must give way.
The problem is one that calls for balancing the public interest in protecting the flow of information against the individual's right to prepare his defense. Whether a proper balance renders nondisclosure erroneous must depend on the particular circumstances of each case, taking into consideration the crime charged, the possible defenses, the possible significance of the informer's testimony, and other relevant factors.
Id. at 60-61, 62.
Defendants here have made no showing that disclosure of informant information is needed for their defense, largely because, I assume, they are in the dark as to whether informants and undercover agents were in fact used during the investigation. The government has not said, nor has it suggested how disclosure in this case would harm the public interest. I therefore lack sufficient information to strike the balance mandated by Rovario. Accordingly, the government shall, within ten days of the date of this Order, submit the following to the Court in camera :
1) a list of informants and undercover agents, if any, involved in the investigation;
2) a statement of the role of each, including whether he or she was directly involved in any actual criminal transactions charged;
3) any reasons why the government would oppose disclosure of the identity of any such informants or agents.
If after reviewing this material the Court believes that disclosure is warranted, the parties will be so notified.
I have carefully reviewed the remainder of defendants' discovery demands. Some of the material has been turned over, and some of it will be turned over at trial pursuant to 18 U.S.C. § 3500. All other requests are denied as beyond the scope of pretrial discovery under Fed. R. Crim. P. 16.
C. Bill of Particulars
Defendants have requested that the government provide a wide variety of information in a bill of particulars. Fed. R. Crim. P. 7(f). A bill of particulars has three purposes: to 1) ensure that the defendant adequately understands the charges so that he can prepare his defense; 2) avoid unfair surprise at trial; and 3) enable the defendant to plead double jeopardy if subsequently prosecuted for the same offense. United States v. Shoher, 555 F. Supp. 346, 349 (S.D.N.Y. 1983); see Wong Tai v. United States, 273 U.S. 77, 82, 71 L. Ed. 545, 47 S. Ct. 300 (1927). Where "facts supplemental to those contained in the indictment . . . are necessary to apprise the defendant of the charges against him with sufficient precision," United States v. Persico, supra, 621 F. Supp. at 868, a bill of particulars is appropriate.
This mechanism is not to be used, however, to force the government to disclose its evidence, United States v. Gottlieb, 493 F.2d 987, 984 (2d Cir. 1974), or its legal theory, United States v. Leonelli, 428 F. Supp. 880, 882 (S.D.N.Y. 1977). Nor may the government be forced to describe "the precise manner in which the crime . . . is alleged to have been committed." United States v. Andrews, 381 F.2d 377, 377-78 (2d Cir. 1967), cert. denied, 390 U.S. 960, 19 L. Ed. 2d 1156, 88 S. Ct. 1058 (1968). The bill of particulars is not a general investigative tool for the defense. United States v. Persico, supra, 621 F. Supp. at 868; see United States v. Salazar, 485 F.2d 1272, 1278 (2d Cir. 1973); cert. denied, 415 U.S. 985, 39 L. Ed. 2d 882, 94 S. Ct. 1579 (1974); see generally United States v. Shoher, supra, 555 F. Supp. at 349-50.
I have carefully reviewed the defendants' requests in light of the principles discussed above, and conclude that, with one exception, the demand must be denied. Among the factors considered by courts in determining whether particulars are warranted are the complexity of the offense, the clarity of the indictment, and the discovery otherwise available to the defendants. See United States v. Shoher, supra, 555 F. Supp. at 349. While this case is not uncomplicated, it can be broken into distinct areas of criminal activity. See supra Part IV.B. The indictment is quite detailed, and defendants have . received voluminous discovery materials. Much of the information they seek to have the government particularize is already available to them in these documents.
The material defendants want is so broad and so detailed that its provision "would amount to a point by point revelation of each morsel of the government's proof." United States v. Goldman, 439 F. Supp. 337, 352 (S.D.N.Y. 1977).
The one respect in which the government will be required to particularize its allegations involves Counts Eight through Fifteen, the securities fraud charges. The indictment states that John Russo supplied to his codefendants "confidential, material, nonpublic information relating (a) to the proposed merger of AEI and CF Air Freight in 1983, and (b) to litigation between AEI and Teamsters Locals 295 and 851 concerning the proposed merger of AEI and CF Air Freight in 1983." Defendants wish to be enlightened as to the precise nature of the inside information on which they are alleged to have traded. I agree that a defendant cannot be expected to defend against a charge of insider trading without knowing what the inside information is. Accordingly, the government shall, within ten days of the date of this Order, describe as specifically as possible the information to which the above-quoted language refers.
All other requests for particulars are denied for the reasons stated above.