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United States of America v. Martin Weisberg

April 5, 2011


The opinion of the court was delivered by: Nicholas G. Garaufis, United States District Judge.


Defendant Martin Weisberg ("Weisberg") is charged with ten counts of wire fraud and one count of money laundering. (Ind. (Docket Entry # 1).) At issue in this opinion are subpoenas duces tecum, issued by the court on January 21, 2011, on Weisberg's motion. (Docket Entry ## 122-1, 124-1.) Non-parties Baker & McKenzie LLC ("B&M"), Crowell & Moring LLP ("Crowell"), and Peter Ginsberg, Esq. ("Ginsberg") move to quash these subpoenas. (Docket Entry ## 122, 123, 124.) Also at issue here is Weisberg's request that this court issue letters rogatory to the countries of Anguilla and the Bahamas. For the reasons stated below, the court grants in part and denies in part the motions to quash the Rule 17(c) subpoenas and declines to issue the letters rogatory.*fn1


The charges in the Indictment involve companies operating in Anguilla and the Bahamas: JMV Fixed Income Arbitrage Performance Partners, Ltd. ("JMV"), Regenmacher Holdings Limited ("Regenmacher"), and SIAM Capital Management, Ltd. ("SIAM") (collectively, the "SIAM Entities"). (Ind. ¶¶ 1-3.) According to the Indictment, the SIAM Entities agreed, in an escrow agreement dated August 11, 2006 ("the Escrow Agreement"), to have $30 million deposited into an escrow account (the "Escrow Account") "for future use by JMV in the event it incurred expenses and obligations related to a legal dispute." (Id. ¶ 4.) The SIAM Entities hired Weisberg, then a lawyer for B&M, to be the escrow agent, and Weisberg served as such from August 11, 2006 until October 29, 2007. (Id. ¶ 5.)

Under the Escrow Agreement, Weisberg was to deposit the $30 million into either a non-interest-bearing bank account or an Interest on Lawyer Account ("IOLA"). (Id. ¶ 6.)*fn2 Weisberg assured representatives of the SIAM Entities that he would deposit the money in this fashion. (Id. ¶ 7.) The Government alleges, however, that Weisberg "secretly" deposited the money into an interest-bearing account instead, resulting in the accrual of $1.6 million in interest over the course of the scheme. (Id.) Instead of maintaining the interest money for the SIAM Entities, Weisberg, without the knowledge or authorization of the SIAM Entities, transferred $1.3 million out of the Escrow Account, and appropriated the money for his own private purposes. (Id. ¶ 8.) To conceal this misappropriation, Weisberg allegedly sent letters to a representative of the SIAM Entities misstating the Escrow Account balance and concealing the fact that the account was earning interest. (Id. ¶ 9.)

According to the statement of facts set forth by Weisberg in a previous memorandum of law,*fn3 the SIAM Entities provided investment management and financial services. (Sept. 23, 2009 Memorandum in Support ("Sept. 2009 Br.") (Docket Entry # 50) at 1.) In 2004, the SIAM Entities agreed to invest $50 million (the "JMV Investment") on behalf of Liechtenstein-based entities controlled by an Austrian Bank, BAWAG P.S.K. ("BAWAG"). (Id. at 1, 4-5.) One of those Liechtenstein entities was called Bagani Stiftung ("Bagani"). (Id.)

In July 2006, someone named Thomas Hackl contacted Weisberg in connection with retaining Weisberg and B&M to represent the SIAM Entities in a legal dispute between the SIAM Entities and BAWAG. (Id. at 4-5.) In connection with this dispute, Weisberg and his partner, Richard A. DePalma ("DePalma"), set up the $30 million Escrow Account "on behalf of" the SIAM Entities, "among others." (Id. at 2, 5.) The $30 million Escrow Account "represented a portion" of the $50 million JMV Investment. (Id. at 5.) There is currently civil litigation pending in an Anguillian court between Bagani and the SIAM Entities with respect to the ownership of the $50 million JMV Investment. (Id. at 7.)

After Weisberg was indicted in an unrelated case in August 2007, the SIAM Entities terminated their relationship with Weisberg and B&M. (Id.)

Weisberg has represented that his defense at trial will be that someone with authority over the Escrow Account authorized Weisberg to place the escrow money in an interest-bearing account and authorized Weisberg to appropriate that interest. In order to support this defense, Weisberg seeks evidence from several non-parties: Weisberg's previous employer B&M; Crowell, which also previously represented the SIAM Entities; Ginsberg, who currently represents the SIAM Entities; and the SIAM Entities themselves.

In a July 16, 2010 letter, Weisberg requested that the court issue subpoenas duces tecum, under Federal Rule of Criminal Procedure 17(c), directing those non-parties to disclose various documents and records. (Docket Entry # 81.) The court issued the subpoenas, and B&M, Crowell, and Ginsberg moved to quash them, arguing that the requested evidence was protected by the attorney-client and attorney work product privileges, and that Weisberg had failed to meet the requirements of Rule 17(c). (Docket Entry ## 84, 93, 94.) In a September 10, 2010 letter, Weisberg informed the court that Ginsberg, counsel for the SIAM Entities, had refused to accept service of the Rule 17(c) subpoena directed to the SIAM Entities, which are not in the court's jurisdiction. (Docket Entry # 88.) Therefore, Weisberg moved the court to issue letters rogatory to the courts of Anguilla and the Bahamas, in order to request their assistance in obtaining the requested documents from the SIAM Entities. (Id.) Weisberg submitted revised letters rogatory on November 29, 2010. (Docket Entry # 105.)

In a December 3, 2010 memorandum and order ("December 3 Order"), the court quashed the subpoenas, finding that they requested the kind of broad discovery permissible in civil actions, but not criminal actions, and therefore did not meet the requirements of Rule 17(c). (Docket Entry # 108.) The court also denied Weisberg's motion for the issuance of letters rogatory, which were similarly overbroad. (Id.) The court noted that Weisberg would be permitted to make future Rule 17(c) subpoena requests, but that such requests "must identify specific documents or drastically narrowed groups of documents." (Id. at 4.) Further, the court noted, Weisberg, in making any future requests for letters rogatory, would have to show not only that the requirements of Rule 17(c) had been met, but also that "the evidence sought cannot be obtained through other means and that it is sufficiently important to justify delaying trial indefinitely while the time consuming and uncertain letter rogatory process takes its course." (Id.)

In a January 7, 2011 ex partesubmission to the court, Weisberg requested that the court issue new Rule 17(c) subpoenas to B&M, Crowell, and Ginsberg, and also issue newly formulated letters rogatory to Anguilla and the Bahamas, all requesting a narrower range of items than the originals had. In the January 7 ex parte submission, Weisberg explained in more detail why the requested items were necessary to his defense. The court issued the new Rule 17(c) subpoenas on January 21, 2011. In an order issued the same day ("January 21 Order"), the court ordered Weisberg to show cause why the new letters rogatory should be issued. (Docket Entry # 119.) The court cautioned that Weisberg "should demonstrate that (1) the documents requested are necessary to his defense, especially in light of the potentially similar evidence contained in the Rule 17(c) subpoenas; (2) the issuance of letters rogatory for the production of documents is appropriate in a criminal case, under the specific circumstance found here; and (3) the receiving countries are likely to timely comply with the actual letters rogatory requests made here. Weisberg should point the court to legal authority specifically supporting each of these showings." (Id. at 1.) Weisberg responded with another ex partesubmission, dated February 4, 2011. On February 25, 2011, B&M, Crowell, and Ginsberg submitted motions to quash the new Rule 17(c) subpoenas. (B&M Motion (Docket Entry # 122); Ginsberg Motion (Docket Entry # 123); Crowell Motion (Docket Entry # 124).)

B&M has indicated that it has turned over to Ginsberg all of the records and documents in its possession responsive to the Rule 17(c) subpoenas. (B&M Motion at 2, 3-4.) Crowell has also indicated that it has turned over to Ginsberg all responsive records and documents, except for "limited billing files." (Crowell Motion at 1, 4.) Furthermore, Ginsberg has indicated that, "in the spirit of cooperation," he was in the process of reviewing and turning over to Weisberg any "documents and communications" in his possession, including documents provided to him by B&M, that "concern the establishment and administration of the escrow account." (Ginsberg Motion at 4.) In their March 9, 2011 response, Weisberg's counsel indicated they were "in receipt of initial productions" from Ginsberg "in response to our Rule 17(c) subpoena to Baker & McKenzie." (Docket Entry # 125 at 1.)


A. Rule 17(c) Subpoenas

1. Applicable Law

a. Requirements of Rule 17(c)

The Supreme Court has warned that a Rule 17(c) subpoena "[is] not intended to provide a means of discovery for criminal cases." United States v. Nixon, 418 U.S. 683, 698 (1974); see also United States v. Cherry, 876 F. Supp. 547, 553 (S.D.N.Y. 1995) ("Rule 17(c) can be contrasted with the civil rules which permit the issuance of subpoenas to seek production of documents or other materials which, although not themselves admissible, could lead to admissible evidence."); United States v. Cuthbertson, 630 F.2d 139, 146 (3d Cir. 1980) (cautioning against the use of 17(c) subpoenas as a "broad discovery device").

A Rule 17(c) subpoena must "clear three hurdles: (1) relevancy; (2) admissibility; (3) specificity." Nixon, 418 U.S. at ...

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