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United States v. Stein

August 3, 2007

UNITED STATES OF AMERICA,
v.
JEFFREY STEIN, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Lewis A. Kaplan, District Judge

MEMORANDUM AND ORDER

The government moves for a severance of defendant Greenberg from defendants Larson, Makov, Pfaff and Ruble and proposes to try defendant Greenberg first. These five defendants move for a continuance of the trial, which recently was postponed from September 17, 2007 until October 16, 2007. They claim that they cannot be ready to try the case in mid-October because (1) the government may reconfigure its case, (2) the July 16 dismissal of thirteen defendants from the case disrupted defense preparations and deprived these five defendants of resources that would have been devoted to the matter by the other thirteen, (3) the government has not yet completed the electronic database that it belatedly offered to the defendants, and (4) the government has produced about 2 million more pages of documents since November 2006 on top of the roughly 22 million pages produced prior to that time.

Severance

The government motion for a severance -- which is opposed by four of the five remaining defendants -- comes against an interesting background. The government of course chose to indict these defendants, and the thirteen others as to whom the indictment recently was dismissed, together. The indictment charges, among other things, a single overarching conspiracy. The government steadfastly and successfully resisted efforts by defendants to obtain separate trials. In time, however, its position changed.

Although their initial motions for severance were denied, the defendants renewed those efforts in 2006. In response to the new motions, the government again opposed any severance. At oral argument, however, its new lead prosecutor shifted ground, saying that he did not believe that "a single trial of 18 defendants . . . is the best way to try the case."*fn1 The government then indicated that if the Court were inclined to grant defendants' motions, it would prefer to divide the eighteen defendants into two groups for trial. In doing so, it argued against a separate trial of defendants Larson, Makov, Pfaff and Ruble -- precisely the group it now proposes to try separately -- on the ground that Messrs. "Larson, Pfaff and Ruble were intimately involved in virtually the entire gamut of the fraudulent activity alleged in the indictment."*fn2

The Court denied any severance. Now the government seeks another bite at the apple, this time asking for the separate trial of Larson, Makov, Pfaff and Ruble that it opposed some months ago.

The government's application is not justified on grounds of economy or efficiency.

While it claims that its case-in-chief in a Greenberg-only trial would take only three weeks, it acknowledges that removing Mr. Greenberg from the trial of the other defendants would reduce the length of that trial, as compared with a combined trial, by roughly the same amount.*fn3 Even if it is correct, there would be little or no overall time saving in the government's cases-in-chief, and the amount of time devoted to jury selection, openings, summations, and doubtlessly lengthy jury instructions would be increased materially. Nor has the government attempted to demonstrate that it would be prejudiced by trying these five defendants together. The only basis for the request that occurs to the Court is an effort to gain some unspecified tactical advantage. But this is not sufficient.

As the Supreme Court has explained, the interests of efficiency and consistency of outcome generally favor joint trials of defendants indicted together.*fn4 "[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."*fn5 To be sure, the applicant here is the government, not a defendant. But the government "is in a very poor position to request separate trials" because it was "in the controlling position" to determine how the case initially was charged.*fn6 Certainly in the absence of a specific showing of prejudice to the government, and perhaps even then, the government is not entitled to a severance. The government has made no such showing here.

Continuance

In addressing defendants' application, it is important to begin by setting out the facts relating to the setting of the case for trial.

All of the moving defendants save Messrs. Makov and Greenberg were indicted in August 2005, nearly two years ago. On September 6, 2005, the case was set for trial on May 1, 2006. Following the return of the superseding indictment on October 17, 2005 (when Messrs. Makov and Greenberg were added as defendants), the case was set for trial on September 11, 2006. After the decision in Stein I,*fn7 that date was continued until January 15, 2007, principally in an effort to enable resolution of the attorneys' fee advancement issue and to provide more time in light of the discovery problems that had occurred.

In September 2006, the Court of Appeals stayed the ancillary proceeding in which the KPMG Defendants sought a determination that KPMG was obliged to advance defense costs to many of the defendants. In light of the uncertainty as to KPMG's obligations with respect to attorneys' fees and the government's then recent production of 7 million documents, defendants in November 2006 sought a delay of the trial until April 2007.*fn8 On November 14, 2006, the Court postponed the trial sine die pending a conference with counsel, but on December 21, 2006 set the trial for ...


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