The opinion of the court was delivered by: John Martin, United States District Judge
In this action the Defendants made a number of motions, most of which were decided at oral argument. The Court reserved decision on motions by various Defendants for a severance and the motion of the Defendant Freedman to dismiss two of the counts.
While each Defendant has filed a motion for a severance, they make a variety of different arguments. Some argue that certain counts in which they are named should be severed from other counts naming them, while others argue that counts in which they are named should be severed from other counts naming only their co-defendants.
The forty-nine counts in the indictment relate to three separate conspiracies: 1) a conspiracy to defraud the United States and certain creditors of two of the Defendants, Monty D. Hundley and Stanley S. Tollman, by covering up the true financial condition of those two individuals and inducing their creditors to sell their debt for less than fair value to entities they controlled and then failing to report the gain from these transactions to the Internal Revenue Service; 2) a conspiracy to defraud the Internal Revenue Service by failing properly to report to the IRS the compensation of various employees of entities controlled by Hundley and Tollman; and 3) a conspiracy involving Stanley Tollman, his wife and his son, Brett G. Tollman, to evade taxes by having various fees paid to certain channel island entities and by not reporting the existence of these accounts or the income to the IRS.
Rule 8(a), which permits joinder of unrelated offenses of a similar character against a single defendant, provides:
The indictment or information may charge a defendant
in separate counts with 2 or more offenses if the
offenses charged — whether felonies or misdemeanors
or both — are of the same or similar character, or
are connected with or constitute parts of a common
scheme or plan.
Rule 8(b), which addresses joinder of multiple defendants, provides:
The indictment or information may charge 2 or more
defendants if they are alleged to have participated
in the same act or transaction, or in the same series
of acts or transactions, constituting an offense or
As Judge Schwartz of this Court observed in United States v. Reinhold, 994 F. Supp. 194, 197-98 (1998):
Where, as here, joinder involves both multiple
offenses and multiple defendants, the standards of
Rule 8(b) must be applied. United States v.
Attanasio, 870 F.2d 809, 814 (2d Cir. 1989).
Accordingly, joinder of defendants and counts is
proper where the criminal acts of two or more persons
(1) arise out of a common plan or scheme or (2) are
unified by some substantial identity of facts or
participants. United States v. Lech,
161 F.R.D. 255, 256 (S.D.N.Y. 1995).
Where as here a defendant joined with others challenges only the joinder of claims in which he alone is named, there has been some debate as to whether that severance claim is governed by the standards of Rule 8(a) or 8(b).
It suffices to say here that I am in complete accord with the well-reasoned and thorough decision of Judge Motley in United States v. Biaggi, 705 F. Supp. 852 (1988), aff'd 909 F.2d 662 (2d Cir. 1990), in which she concluded that, when a defendant moves to sever claims in which he alone is named from counts charging him and others, Rule 8(a) provides the governing standard. Using that standard, the motions of those defendants seeking to sever counts in which they alone are named must be denied.
The more difficult question is whether the three separate conspiracies alleged and the substantive counts relating to those conspiracies can fairly be said to arise from "the same series of acts or transactions constituting an offense or offenses." While a strict literal reading of that language might suggest that the answer is no, the Second Circuit has given the language of Rule 8(b) a broader reading:
We read this to mean that the acts must be "unified
by some substantial identity of facts or
participants," or "arise out of a common plan or
scheme," United States v. Porter, 821 F.2d 968, 972
(4th Cir. 1987), cert. denied, 485 U.S. 934,
108 S.Ct. 1108, 99 L.Ed.2d 269 (1988); see also United
States v. Green, 561 F.2d 423, 426 (2d Cir. 1977),
cert. denied, 434 U.S. 1018, 98 S.Ct. 739,
54 L.Ed.2d 764 (1978).
United States v. Attanasio, 870 F.2d 809
, 815 (1989)
The answer to the joinder issue depends on how narrowly or broadly one construes the common scheme or schemes in which these Defendants were engaged. The Defendants argue that each of the conspiracies was a separate scheme and therefore separate trials are required with respect to the offenses arising from each of the schemes, i.e, the creditor fraud scheme, the compensation scheme and the channel island scheme. However, the indictment can also be read as alleging that these defendants were engaged in a broad scheme to enrich themselves and their associates by any fraudulent means required, which included defrauding the Hundley-Tollman creditors and the IRS through the creditor fraud, the compensation fraud and the channel island fraud.
Even though there are three separate conspiracies alleged, those conspiracies involve "substantial identity of facts [and] participants." All of the Defendants are named as conspirators in the bank fraud conspiracy and all but one of ...