The opinion of the court was delivered by: Nicholas G. Garaufis, United States District Judge.
There are two motions in-limine before the court. On March 2, 2012, the government filed a motion in-limine to preclude the defendant, Martin Weisberg, from referring at trial to Jon M. Knight's 2004 conviction for First Degree Attempted Grand Larceny in New York Supreme Court. (See Docket Entry # 160.) A week later Weisberg, cross-moved to preclude the government from introducing a variety of evidence that he claims to be of little probative value and much prejudicial risk. (See Docket Entry # 170.)
The government's motion in-limine is GRANTED. Weisberg is precluded from presenting evidence, asking questions, or making any reference to Jon M. Knight's criminal conviction. If he can lay the proper foundation, however, Weisberg may cross-examine certain government witnesses about an order of the United States Securities and Exchange Commission ("SEC Order") that bars Jon M. Knight from association with "investment advisors," and the witnesses' role, if any, in helping Jon M. Knight circumvent the that order. Before Weisberg can engage in this line of inquiry, he must establish a reasonable basis for the witnesses to believe that Jon M. Knight was violating the terms and conditions of the SEC Order. This may require a legal showing that SEC Order actually barred Jon M. Knight from associating with SIAM and its affiliates.
Weisberg's motion in-limine is GRANTED in part and DENIED in part without prejudice. It is granted to the extent that the government shall redact those portions of Government Exhibit 59 that the parties agree are irrelevant to the factual issues before the jury; and it is denied without prejudice as to the remainder of the motion.
The court addresses the government's motion first.
Jon M. Knight ("Knight, Sr.") is the father of Jayme Colter and Jonathon Knight ("Knight, Jr."), who are officers of the victims of Weisberg's alleged fraud-SIAM Capital Management, Ltd and two affiliated entities. According to the government, Colter and Knight, Jr. will be among the witnesses called to testify at trial. (See Gov't Mot. in-Limine (Docket Entry # 160) at 1.) Knight, Sr. is a convicted felon. In 2004, he pled guilty to Attempted Grand Larceny in the First Degree (Weisberg Ltr. of Mar. 28, 2012, Ex. A (Docket Entry # 184-1)), apparently for his role in a ponzi scheme, see In re Jon M. Knight, 380 B.R. 67 (Bank. M.D. Fla. 2007). As a result of his conviction, the United States Securities and Exchange Commission issued an order pursuant to § 203(f) of the Investment Advisors Act of 1940 ("Investment Act" or "Act") barring Knight, Sr. "from association with any investment adviser." (See Weisberg Ltr. of Mar. 28, 2012, Ex. B (Docket Entry # 184-2).)
The government argues that evidence of Knight, Sr.'s conviction is irrelevant to any fact of consequence in determining Weisberg's guilt for wire fraud and money laundering. (See Gov't Reply (Docket Entry # 185) at 2 (citing Fed. R. Evid. 402).) In the alternative, the government argues that even if the evidence of the conviction does bear on a consequential fact, the evidence is more prejudicial than probative because of the risk that it will improperly tarnish Knight, Jr.'s and Colter's reputations through guilt-by-association. (See id. (citing Fed. R. Evid. 403).)
Weisberg maintains that evidence of Knight, Sr.'s conviction is needed to properly impeach the testimony of Knight, Jr., Colter, and other government witnesses affiliated with SIAM. He argues that the government's case will rest on the credibility of these witnesses. (Weisberg Ltr. of Mar. 28, 2012 at 3.) They will testify that Weisberg's actions related to the escrow account were unauthorized. (Id.) Weisberg will argue that his actions were authorized. Weisberg contends that he must be allowed to introduce evidence of dishonest acts by the witnesses if he is to undermine their credibility. (Id.) It is here that Knight, Sr.'s conviction becomes potentially relevant. According to Weisberg, although he held no official position within the company, Knight, Sr. was SIAM's "de facto principal" (Weisberg Ltr. of Apr. 10, 2012 (Docket Entry # 189) at 1) and "principal-decision maker" (Weisberg Ltr. of Mar. 28, 2012 at 2). The theory is that, because the SEC Order prevented Knight, Sr. from holding office at SIAM, he inserted his children, Knight, Jr. and Colter, as "nominal officers and directors," to serve as his proxies. (Id. at 3.) By allowing Knight, Sr. to operate SIAM from behind the scenes, the argument goes, Knight, Jr., Colter, and the other SIAM witnesses helped Knight, Sr. circumvent the SEC order. Weisberg argues that this "aiding and abetting" (id.), if not itself criminal, certainly constitutes dishonest conduct about which the witnesses may be properly cross-examined.
There are two main problems with Weisberg's theory. First, it is not clear that it is factually supported. And second, if there is a foundation for impeaching the government witnesses on the basis of Knight, Sr.'s role at SIAM, the theory does not explain why the jury needs to know about Knight, Sr.'s conviction rather than just the SEC Order.
The parties do not agree on the facts relevant to Weisberg's proffered line of cross-examination. The government disputes Weisberg's assertion that Knight, Sr. played a significant role in SIAM's management. (See Gov't Reply at 1-2.) While conceding that Knight, Sr. did "on occasion" provide consulting services to SIAM (Gov't Mot. in-Limine at 1), the government asserts that "there is no good faith evidentiary basis" for the assertion that the SIAM's officers, directors, and employees were a "sham, or in any way provid[ed] 'cover' for Jon M. Knight" (Gov't Reply at 2). It also claims that there would have been no need for Knight, Sr. to create the front Weisberg alleges because the SEC Order would not have prevented Knight, Sr. from associating with SIAM. The government argues that, since SIAM was an offshore entity doing business offshore, it was outside the Security and Exchange Commission's jurisdiction and therefore the order would not have affected Knight, Sr.'s role with company.
With respect to Knight, Sr.'s actual involvement with SIAM's day-to-day operations, it is not possible to discern which party's version of the facts is more accurate. Clearly, Knight, Sr. played a role in retaining Weisberg to represent SIAM. In an email to Weisberg dated June 27, 2006, Knight Sr. wrote:
Dear Marty, Very nice to meet you today on the phone. Thomas recommends you very highly. In terms of your retainer, and in all actions, I am only acting as agent for the principals in the negotiation and, if (hopefully not) necessary, litigation.
Your lead client will be SIAM Capital Management . . .. (Weisberg Ltr. of Apr. 10, 2012, Ex. C (Docket Entry # 86-3) at 3.) Knight, Sr.'s involvement in other aspects of Weisberg's relationship with SIAM, however, remains undocumented. Weisberg claims that Knight, Sr. came to New York in July 2006 to meet with Weisberg and Richard DePalma, that he came again in October 2006, and that he "was on all of strategy conference calls and e-mails with Messrs. Weisberg and DePalma." (Weisberg Ltr. of Mar. 28, 2012 at 2.) Likewise, Weisberg asserts that it was Knight, Sr., not his children or other SIAM officials, who negotiated Weisberg's repayment of the interest removed from the escrow account. (Id.) None of these allegations is directly supported by the record. Instead, Weisberg points to his billing records from Baker & McKenzie, along with those of Peter Ginsberg, to show that both lawyers had some contact with either "J. Knight" (Weisberg Ltr. of Apr. 10, 2012, Ex. A (Docket Entry # 86-1)) or "JK" (id., Ex. B (Docket Entry # 86-2)). The problem, of course, is that there are two "J. Knights" and two "JKs" to whom the records could be referring. Absent an affidavit or testimony from Ginsberg, Weisberg, or Richard DePalma (whose entries also appear on the Baker & McKenzie time sheet), it is impossible to know if the lawyers were dealing Knight, Sr. or his son, Knight, Jr.
There is also some question as to the scope and effect of the SEC Order.*fn1 The Investment Act defines "investment advisor" as any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, who, for compensation ...