The opinion of the court was delivered by: William M. Skretny Chief Judge United States District Court
Defendants Guy W. Gane, Jr., Ian Campbell Gent, and James F. Lagona, are charged in a 51-count indictment with various crimes related to an investment fraud scheme. Currently before this Court are two motions for severance, filed by Defendants Gane and Gent. For the following reasons, the motions are denied.
Defendants are charged with various crimes related to the sale of securities through Watermark Financial Services Group and M-One Financial Services, two investment advisor firms. Defendants are charged together in Counts 1-31 with mail fraud and in Count 32 with conspiracy to commit mail fraud. Gane alone is charged in Counts 33-38 with securities fraud and in Counts 39-51 with money laundering.
According to the indictment, Gane was the president of both Watermark and M-One; Gent was the Chief Financial Officer; and Lagona was in-house counsel and managing director. (Indictment, ¶¶ 4, 6, and 8.) In 2006, Gane and his sales staff offered clients investment opportunities in one- or two-year "debentures" that promised 10% annual interest. (Indictment, ¶ 5.) These "debentures," which were drafted by Lagona, were not registered with any regulatory authority. (Indictment, ¶¶ 5, 6.) After his hiring in 2007, Gent joined Gane and Lagona in the marketing and sale of the "debentures." (Indictment, ¶ 8.)
Beginning in 2007, Gane and his staff began offering "promissory notes" to investors, with a monthly return of 1% to 2%. (Indictment, ¶ 9.) Promissory notes were offered in lieu of repayment on maturing "debentures" and were also offered as new investments. (Indictment, ¶ 9.)
It is alleged that from January 2006 to May 2008, Gane and his sales force received more than $5,800,000 of investor funds in exchange for these "debentures" and "promissory notes." (Indictment, ¶ 10.) It is further alleged that Defendants were essentially operating a Ponzi scheme, paying old investors with funds obtained from new investors, without ever legitimately investing the funds.
Each defendant has pled not guilty to the charges against him.
III. DISCUSSION AND ANALYSIS
Multiple defendants may properly be charged together in an indictment or information "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 offenses." FED. R. CRIM. P. 8(b). The preference in the federal system is that defendants who are indicted together be tried together. See United States v. Ventura, 724 F.2d 305, 312 (2d Cir. 1983). Joint trials are efficient, "play a vital role in the criminal justice system," and "serve the interests of justice by avoiding the scandal and inequity of inconsistent verdicts." Richardson v. Marsh, 481 U.S. 200, 209-10, 107 S.Ct. 1702, 1708, 95 L.Ed.2d 176 (1987).
But despite this preference, a single trial for co-defendants is not mandated. Even if properly joined under Rule 8, Rule 14 vests the court with discretion to sever the defendants' trials or provide any other relief that justice requires, if it finds that joinder appears to prejudice a defendant or the government. FED. R. CRIM. P. 14(a). Decisions on severance are reserved to the trial court's discretion and are considered by the Second Circuit to be "virtually unreviewable." See United States v. Harwood, 998 F.2d 91, 95 (2d Cir. ...