The opinion of the court was delivered by: Robert Sweet, Senior District Judge
Defendant John J. Cassese ("Cassese") moves to: (1) suppress certain statements he made during the course of plea negotiations pursuant to Federal Rule of Criminal Procedure 11(f) and Federal Rule of Evidence 410; and (2) dismiss Count Two of the Indictment as legally insufficient. For the reasons stated below, this motion is granted in part.
Indictment, 03 Cr. 302 (RWS) ("Ind."), was filed on March 12, 2002 in two counts. Count One charges Cassese with securities fraud in connection with a tender offer, in violation of 15 U.S.C. § 78n(e) and 78ff and 17 C.F.R. § 240.14e-3(a). Count Two charges Cassese with securities fraud, in violation of 15 U.S.C. § 78j (b) and 78ff, 17 C.F.R. § 240.10b-5 and 18 U.S.C. § 2. On March 17, 2003, Cassese entered a plea of not guilty to both counts. Trial is scheduled to commence on September 15, 2003.
These pretrial motions were heard and marked fully submitted on June 25, 2003.
According to the Indictment, Cassese was the Chairman and President of Computer Horizons Corporation, a New York corporation with its principal place of business in Mountain Lakes, New Jersey. (Ind. ¶¶ 1-2.) Computer Horizons engaged in the business of providing temporary staffing of computer and information technology personnel. (Ind. ¶ 1.) The common stock of Computer Horizons was registered with the United States Securities and Exchange Commission (the "SEC") and publicly traded on the NASDAQ National Market System. Id. As Chairman and President of Computer Horizons, Cassese participated in negotiating mergers and acquisitions between Computer Horizons and other companies, including other publicly traded companies. (Ind. ¶ 2.)
On April 12, 1999, Cassese and another representative of Computer Horizons met with a senior manager of Compuware Corporation ("Compuware") to discuss a potential acquisition of Computer Horizons by Compuware. (Ind. ¶ 5.) Compuware, a Michigan corporation with its principal place of business in Detroit, Michigan, was also engaged in the business of providing temporary staffing of computer and information technology personnel. (Ind. ¶ 3.) After the meeting, negotiations regarding the proposed acquisition continued. (Ind. ¶ 5.)
On or about May 4, 1999, in connection with the ongoing discussions, Compuware sent Cassese and Computer Horizons a confidentiality agreement, which, among other things, sought to prohibit any Computer Horizons employee from trading securities based upon any material, nonpublic information learned from the discussions. However, neither Cassese, nor anyone else, executed the confidentiality agreement on behalf of Computer Horizons. Additionally, on May 4, 1999, Compuware sent Computer Horizons a letter of intent setting forth the proposed terms of the Compuware acquisition of Computer Horizons. (Ind. ¶ 6.)
The Indictment alleges that in or about April and May 1999, while the negotiations between Compuware and Computer Horizons were ongoing, representatives of Compuware met with executives from Data Processing Resources Corp. ("DPRC") to discuss a potential merger of those two companies. On or about May 26, 1999, Compuware advised DPRC that it was interested in acquiring all of the issued and outstanding shares of DPRC through a tender offer of $25 per share, a price substantially above the then-prevailing market price of DPRC. On or about June 2, 1999, DPRC privately advised Compuware that it would accept its $25 offer. (Ind. ¶ 7.)
On or about June 21, 1999, Compuware's Chief Executive Officer, Peter Karmanos ("Karmanos"), telephoned Cassese and advised him that Compuware would not acquire Computer Horizons, but rather it would acquire DPRC instead. (Ind. ¶ 8.) The Indictment alleges that at the time of this conversation, as Cassese knew, Compuware had not yet publicly announced its proposed acquisition of DPRC. (Ind. ¶ 8.)
The following day, on or about June 22, 1999, Cassese telephoned two securities brokers, one of which was located in New York, and placed orders to purchase a total of 15,000 shares of DPRC. Shortly thereafter, Cassese's orders were executed at prices of approximately $13.25 per share. Cassese did not disclose to the purchasers of his shares that he knew material, non-public information from Compuware's Chief Executive Officer that Compuware agreed to acquire DPRC. (Ind. ¶ 9.)
On or about June 23, 1999, the Board of Directors of DPRC and Compuware voted to approve Compuware's acquisition of DPRC by tender offer for approximately $24 per share. (Ind. ¶ 10.) On or about June 24, 1999, prior to the opening of trading on the NASDAQ stock market, Compuware and DPRC issue a press release publicly announcing that Compuware would acquire DPRC at approximately $24 per share. When trading began, the price of DPRC's stock opened at approximately $23.50 per share, representing an increase of approximately $11.25 per share from the previous day's closing price. (Ind. ¶ 11.)
The Indictment further alleges that on or about June 24, 1999, following the public announcements of the tender offer for DPRC, Cassese instructed his securities brokers to sell the 15,000 shares of DPRC stock that Cassese had purchased on or about June 22, 1999. The securities were sold at an average price of $23.31, ...