United States District Court, S.D. New York
August 7, 2005.
UNITED STATES OF AMERICA
ANURADHA D. SAAD and RICHARD P. ADELSON, Defendants.
The opinion of the court was delivered by: JED RAKOFF, District Judge
On June 3, 2005, the Court denied from the bench most of
defendants' preliminary motions, but reserved judgment on
defendant Saad's motion to sever Counts 4 and 5 from the
indictment on grounds of improper joinder and/or prejudice. See
Order, 6/3/05. Having received further briefing on that remaining
motion, the Court now denies Saad's motion to sever Counts 4 and
5, for the following reasons.
Defendants were charged on March 28, 2005, in a single
indictment, with 13 counts. Counts 1 through 3 and 6 through 13
charged the defendants (sometimes individually and sometimes
jointly) with committing and conspiring to commit securities
fraud by falsely inflating, in required filings with the U.S.
Securities and Exchange Commission ("SEC"), the reported revenues
of Impath, Inc., the company of which Saad was then Chief
Executive Officer and Chairman and Adelson was then Chief
Operating Officer. See Indictment ¶¶ 6-7, 64-73, 76-77. The
other two counts, Counts 4 and 5, charged Saad alone with falsely
reporting personal purchases as business expenses, and thereby
underreporting her compensation, in proxy statements required to
be filed with the SEC. Id. ¶¶ 74-75. In the instant motion, Saad seeks to sever the proxy fraud counts from the other
securities fraud counts, asserting that the two sets of counts
are improperly joined, see Fed.R.Crim.P. 8, and that, in any
event, joinder is prejudicial, see Fed.R.Crim.P. 14.
In a multiple-defendant case, a motion by one defendant to
sever counts for improper joinder must be assessed pursuant to
the standard set forth in Rule 8(b) of the Federal Rules of
Criminal Procedure. Although this is not obvious from the plain
language of Rule 8(b), which speaks to joinder of "defendants"
while Rule 8(a) speaks to joinder of "offenses," Second Circuit
precedent mandates the use of Rule 8(b) for all severance motions
in multi-defendant cases. See United States v. Turoff,
853 F.2d 1037, 1043-44 (2d Cir. 1988); United States v. Papadakis,
510 F.2d 287, 299-300 (2d Cir. 1975).*fn1
Under Rule 8(b), joinder is proper where the allegations stem
from "the same series of acts or transactions, constituting an
offense or offenses." Fed.R.Crim.P. 8(b). Joinder is proper
where allegations are "unified by some substantial identity of
facts or participants" or "arise out of a common plan or scheme."
See United States v. Attanasio, 870 F.2d 809, 815 (2d Cir.
Here, there is both a substantial overlap in facts and
participants and a common scheme unifying the proxy fraud counts
with the other securities fraud counts. Saad is alleged to have
participated in both frauds, both are alleged to have occurred
during her tenure as CEO of Impath, and Saad allegedly made use
of her professional position to further both schemes. Indictment
¶¶ 54-60, 75. The proxy fraud and the other securities frauds are
further connected by the common motivation to mislead
shareholders for the purpose of improving the financial and
professional position of those participating in the fraud. Cf.
United States v. Feyrer, 333 F.3d 110, 114 (2d Cir. 2003)
(finding joinder of wire fraud and securities fraud conspiracies
proper where the conspiracies occurred during the same time
period, shared participants, and had a common plan of
"generat[ing] income for [the participants] through fraudulent
stock transactions."); United States v. Rittweger,
259 F. Supp. 2d 275, 284 (S.D.N.Y. 2003) (finding joinder proper where two of
five conspirators overlapped, where the schemes occurred at
approximately the same time, and where both schemes were efforts
to fraudulently induce investment). The counts are therefore
properly joined pursuant to Rule 8(b).
Furthermore, the potential for prejudice resulting from trying
the counts together is insufficient to warrant severance under
Federal Rule of Criminal Procedure 14(a). Where, as here, joinder
is proper, "a district court should grant a severance under Rule
14 only if there is a serious risk that a joint trial would
compromise a specific trial right of one of the defendants, or
prevent the jury from making a reliable judgment about guilt or
innocence." Zafiro v. United States, 506 U.S. 534, 539 (1993). Accordingly, "a
defendant who seeks separate trials under Rule 14 carries a heavy
burden of showing that joinder will result in `substantial
prejudice.'" United States v. Amato, 15 F.3d 230, 237 (2d Cir.
1994) (quoting Turoff, 853 F.2d at 1043). Saad suggests that if
the counts remain joined, she might be deterred from taking the
stand to testify about the proxy fraud for fear of thereby
compromising her ability to not take the stand regarding the
other frauds. All of this, and similar suggestions made by Saad
as to how the joinder of these counts will place the two
defendants in an adversarial position that they would not have in
defending the other counts, is highly speculative. Although
"prejudice may develop when an accused wishes to testify on one
but not the other of two joined offenses, . . . a mere
unexplicated assertion of the desire to testify on only one count
is not enough to require severance." United States v. Sampson,
385 F.3d 183, 190-91 (2d Cir. 2004) (internal quotation marks and
citations omitted). Here, Saad relies on such an "unexplicated
assertion," and this alone will not meet her heavy burden.
Saad further argues that she will be prejudiced by the
admission of evidence related to the proxy fraud that would not
be admissible in a separate trial on the other securities fraud.
Once again, Saad's concerns about such prejudice are purely
speculative, and in any case do not amount to the substantial
prejudice required for joinder. Moreover, it is likely that the
evidence relevant to the proxy fraud would be admissible in a
separate trial on the other securities fraud, either pursuant to Federal Rule of Evidence
404(b) and/or because Adelson has indicated that he intends to
introduce evidence of Saad's alleged proxy fraud, which he claims
to have discovered, in his defense. When evidence of the charge
to be severed is admissible by other means, there can be no
prejudice from joining the counts and severance under Rule 14 is
unnecessary. See United States v. Lane, 474 U.S. 438, 450
Accordingly, for the reasons stated above, Saad's motion to
sever Counts 4 and 5 from the remaining counts in the indictment
against her and Adelson is hereby denied.