United States District Court, E.D. New York
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For Rodney Watts, Defendant: Marion Bachrach, LEAD ATTORNEY, Thompson & Knight, LLP, New York, NY; Richard D. Willstatter, LEAD ATTORNEY, Green & Willstatter, White Plains, NY; Joyce C. London, Law Office of Joyce London, New York, NY; Ronald E. DePetris, Southampton, NY.
For Microsoft Corporation, Interested Party: Patricia Ehrlich Alberts, Orrick, Herrington & Sutcliffe LLP, New York, NY.
For Amalgamated Bank, Interested Party: Jeffrey J. Wild, Robert J Kipnees, LEAD ATTORNEYS, Lowenstein Sandler P.C., Roseland, NJ.
For DePetris & Bachrach, LLP, Interested Party: Marion Bachrach, LEAD ATTORNEY, Thompson & Knight, LLP, New York, NY; Ronald E. DePetris, Southampton, NY.
For USA, Plaintiff: Brian D. Morris, United States Attorneys Office, Brooklyn, NY; Catherine Mary Mirabile, James G McGovern, United States Attorneys Office, Eastern District of New York, Brooklyn, NY; David Carey Woll, United States Attorneys Office, Criminal Division, Brooklyn, NY; James McMahon, Michael Lloyd Yaeger, United States Attorneys Office, Brooklyn, NY; Michael Warren, United States Attorneys Office, Criminal Division, Eastern District of New York, Brooklyn, NY.
KIYO A. MATSUMOTO, United States District Judge.
MEMORANDUM AND ORDER
The government charges defendant Rodney Watts (" Mr. Watts" ) with various counts of Bank Fraud, Making a False Statement, and Conspiracy to Commit Bank, Mail, and Wire Fraud. Presently before the court are the government's and Mr. Watts' respective pretrial requests and motions in limine to preclude evidence at trial pursuant to the Federal Rules of Evidence. For the reasons discussed below, the court hereby grants in part and denies in part the government's and Mr. Watts' respective motions in limine and other pretrial motions and requests.
Familiarity with the facts and prior opinions of this court in this matter is presumed and only the background relevant to these motions is set forth below.
I. The Charges Against Mr. Watts
Mr. Watts is charged in the first four counts of a five-count second superseding indictment. ( See ECF No. 295, Superseding Indictment (" S-2 Indictment" ).) Count One charges Mr. Watts with Conspiracy to Commit Bank, Mail, and Wire Fraud in or about and between January 2007 and July 2010 in violation of 18 U.S.C. § § 1349, 3551 et seq . ( Id. ¶ ¶ 18-19.) Count Two charges Mr. Watts with Bank Fraud in or about and between January 2007 and July 2010 in violation of 18 U.S.C. § § 2, 1344, 3551 et seq . ( Id. ¶ ¶ 20-21.) Count Three charges Mr. Watts with Making a False Statement on or about January 6, 2010 by " willfully overvalu[ing] property and security, for the purpose of influencing the action of Amalgamated Bank upon one or more loans" in violation of 18 U.S.C. § § 2, 1014, 3551 et seq . ( Id. ¶ ¶ 22-23.) Count Four charges Mr. Watts with Making a False Statement on or about May 24, 2010 in violation of 18 U.S.C. § § 2, 1014, 3551 et seq . ( Id. ¶ ¶ 24-25.)
The S-2 Indictment charges that Mr. Watts was the chief financial officer and chief investment officer of GDC Acquisitions, LLC, a holding company of related subsidiaries (collectively, " GDC" ) at the center of this action. ( See id . ¶ 4.) The first four counts of the S-2 Indictment arise out of an alleged scheme to defraud Amalgamated Bank (" Amalgamated" ), a federally insured financial institution, and C3 Capital, LLC (" C3" ), a private equity investment firm, by obtaining, and attempting to obtain, loans for GDC subsidiaries on the basis of false financial statements and other material misrepresentations between January 2007 and July 2010. ( Id. ¶ ¶ 5, 6, 8.)
II. The Parties' Instant Motions and Requests
Watts' trial is currently scheduled to begin on April 29, 2013. ( See Trial Management Order of Feb. 6, 2013.) The government has made nine motions in limine in advance of trial. ( See generally ECF
No. 608, First Mot. in Limine by USA (" Gov. Mem." ).) Watts has likewise made nine motions in limine. ( See generally ECF No. 610, Mot. in Limine by Rodney Watts (" Watts. Mem." ).) Watts has also filed a request, pursuant to Federal Rule of Criminal Procedure 32.2(b)(5)(A), that the trial jury be retained to determine the forfeitability of the property identified in the government's Bill of Particulars for the Forfeiture of Property. (ECF No. 609, Dft.'s Rule 32.2(B)(5)(A) Notification.) Watts further requests that the jury venire be given a questionnaire prior to the date of jury selection, if possible, and that Watts' consulting firm be permitted to conduct internet searches of prospective jurors during jury selection, and exercise peremptory challenges the following day. (ECF No. 656, Ltr. submitting courtesy copies at 1-2; ECF No. 667, Ltr. concerning in camera submission at 2-3.) The court heard oral argument on the parties' motions on February 1, 2013. ( See Minute Entry of Feb. 1, 2013.) At oral argument, the government raised the issue of Watts' production of Federal Rule of Criminal Procedure 26.2 material. (Tr. of Oral Argument dated Feb. 1, 2013 (" Tr." ) at 63-64.) The parties' respective motions in limine and pretrial requests are addressed in turn below.
I. Motion in Limine Standard
The purpose of a motion in limine is to allow the trial court to rule on the admissibility and relevance of certain forecasted evidence before the evidence is actually offered at trial. See Luce v. United States, 469 U.S. 38, 40 n.2, 105 S.Ct. 460, 83 L.Ed.2d 443 (1984); Palmieri v. Defaria, 88 F.3d 136, 141 (2d Cir. 1996). " Evidence should be excluded on a motion in limine only when the evidence is clearly inadmissible on all potential grounds." United States v. Paredes, 176 F.Supp.2d 179, 181 (S.D.N.Y. 2001). Courts considering a motion in limine may reserve decision until trial so that the motion is placed in the appropriate factual context. See Nat'l Union Fire Ins. Co. of Pittsburgh v. L.E. Myers Co. Grp., 937 F.Supp. 276, 286-87 (S.D.N.Y. 1996). Furthermore, the court's ruling regarding a motion in limine is " subject to change when the case unfolds, particularly if the actual testimony differs from what was [expected]." Luce, 469 U.S. at 41.
II. Admissibility of Evidence Pursuant to the Federal Rules of Evidence
The Federal Rules of Evidence govern the admissibility of evidence at trial. Rule 402 requires that evidence be relevant to be admissible. Fed.R.Evid. 402. Relevant evidence is defined as evidence having " any tendency to make the existence of any fact" that is of consequence to the determination of the action " more probable or less probable" than it would be without the evidence. Fed.R.Evid. 401. The court's determination of what constitutes " relevant evidence" is guided by the nature of the charges and the defendant's defense theories.
In addition to the relevancy of the evidence that the government seeks to admit or preclude, however, such evidence is subject to the probative-prejudice balancing test of Federal Rule of Evidence 403. Rule 403 permits the exclusion of evidence, even if relevant, " if its probative value is
substantially outweighed by a danger of . . . unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting of time, or needlessly presenting cumulative evidence." Fed.R.Evid. 403. The Second Circuit has stated that the " 'district court is obviously in the best position to do the balancing mandated by Rule 403,' and, accordingly, this Court grants 'broad discretion' to the district court to admit or exclude evidence pursuant to Rule 403." United States v. George, 266 F.3d 52, 63 (2d Cir. 2001) (quoting United States v. Birney, 686 F.2d 102, 106 (2d Cir. 1982)) (citation omitted). The court applies the foregoing analysis to the parties' respective motions.
III. The Government's Motions in Limine
1. Application of the Law of the Case Doctrine to Watts' Trial
The government asks the court to apply the " law of the case" doctrine to all motions in limine filed in advance of Watts' trial. ( See Gov. Mem. at 1-3.) The government argues that because Watts' trial was stayed only after he had joined in one of Dupree's motions in limine filed in advance of the Dupree/Foley trial, the court should avoid reconsidering issues previously decided in that prior trial. ( Id. at 1 (citing ECF No. 357, Ltr. Joining Dupree's Mot. in Limine).) Indeed, the court did address several issues in advance of the Dupree/Foley trial which are again at issue in advance of Watts' trial. See generally United States v. Dupree, 833 F.Supp.2d 255 (E.D.N.Y. 2011) (government's motions in limine ), vacated in part on other grounds, No. 11-5115-cr, 706 F.3d 131, (2d Cir. Jan. 28, 2013); United States v. Dupree, No. 10-CR-627, (E.D.N.Y. Nov. 28, 2011) (Dupree's pretrial motions and motions in limine ). Watts, however, asserts that the government's argument for application of the law of the case doctrine is too broad. ( See Watts Opp. at 3-6.)
Under the law of the case doctrine, " when a court has ruled on an issue, that decision should generally be adhered to by that court in subsequent stages in the same case." United States v. Carr, 557 F.3d 93, 102 (2d Cir. 2009) (internal quotation marks omitted); see also United States v. Plugh, 648 F.3d 118, 123-24 (2d Cir. 2011). The doctrine is " driven by considerations of fairness to the parties, judicial economy, and the societal interest in finality." Carr, 557 F.3d at 102. " A court's reconsideration of its own earlier decision in a case may, however, be justified in compelling circumstances, consisting principally of (1) an intervening change in controlling law, (2) new evidence, or (3) the need to correct a clear error of law or to prevent manifest injustice." Id. The law of the case doctrine " may be properly invoked only if the parties had a full and fair opportunity to litigate the initial determination." Westerbeke Corp. v. Daihatsu Motor Co., 304 F.3d 200, 219 (2d Cir. 2002) (internal quotation marks omitted). Lastly, application of the doctrine is " discretionary and does not limit a court's power to reconsider its own decisions prior to final judgment." Sagendorf-Teal v. County of Rensselaer, 100 F.3d 270, 277 (2d Cir. 1996) (internal quotation marks omitted); accord Arizona v. California, 460 U.S. 605, 618, 103 S.Ct. 1382, 75 L.Ed.2d 318 (1983) (" Law of the case directs a court's discretion, it does not limit the tribunal's power." ); Westerbeke Corp., 304 F.3d at 219.
Here, despite the fact that Watts' trial was severed at his request, it does not appear that Watts' trial should be entirely governed by all rulings in the Dupree/Foley trial. Watts joined only in Dupree's motion in limine to limit the government's
introduction of certain financial documents on October 3, 2011, just two weeks prior to the court issuing a stay of Watts' criminal trial in order for Watts to pursue an appeal to the Second Circuit, and before the court issued its decision on that motion. ( See Ltr. Joining Dupree's Mot. in Limine; Minute Entry of Oct. 17, 2011.) Therefore, except for the one motion that Watts joined, Watts cannot be said to have had a full and fair opportunity to litigate all of the motions in limine at issue in the Dupree/Foley trial. Westerbeke Corp., 304 F.3d at 219; cf. United States v. Guy, 903 F.2d 1240, 1242 (9th Cir. 1990) (finding doctrine inapplicable because the case " involve[d] different parties convicted in different trials." ) Because Watts did not have the opportunity to fully litigate all of the motions in limine in the Dupree/Foley trial, and because he has now brought motions on other evidence, the court will exercise its discretion to decline to apply the law of the case doctrine to the instant pretrial motions and motions in limine . Instead, each motion will be considered in turn.
2. References to the Possible Consequences of Watts' Conviction
Both parties agree that, consistent with the court's prior ruling in the Dupree/Foley trial, ( see Dupree, 833 F.Supp.2d at 261-63), neither party shall make reference to the potential punishments Mr. Watts would face upon conviction, ( see Gov. Reply at 1; Watts Opp. at 1 n.1). Both parties also agree, however, that Mr. Watts should be able to cross-examine government witnesses about any cooperation agreements with the government and plea allocutions, and to cross-examine said witnesses about the consequences facing said witnesses as a result of their guilty pleas. ( See Gov. Reply at 1; Watts Opp. at 1 n.1.)
As the Supreme Court has held, " [i]nformation regarding the consequences of a verdict is . . . irrelevant to the jury's task." Shannon v. United States, 512 U.S. 573, 579, 114 S.Ct. 2419, 129 L.Ed.2d 459 (1994); see also United States v. Blume, 967 F.2d 45, 49 (2d Cir. 1992) (" Federal courts usually instruct juries not to consider a verdict's consequences." ); Brown v. Artus, No. 04 Civ. 3601, at *26 (S.D.N.Y. Dec. 24, 2008) (" 'Where the jury is permitted to speculate concerning a defendant's possible punishment, a jury cannot properly perform th[e] function' of 'determin[ing] guilt or innocence based upon an impartial consideration of the evidence, unswayed by emotion, fear or prejudice.'" (quoting United States v. Cook, 776 F.Supp. 755, 757 (S.D.N.Y. 1991))), adopted by
(S.D.N.Y. May 27, 2009); United States v. Maisonneuve, 954 F.Supp. 114, 116 (D. Vt. 1997) (" It is well settled that juries are not to consider penalties in reaching their verdicts." ).
Thus, it is well-established precedent that jurors should not be informed about the possible consequences of their verdict due to the likelihood that prejudice, unfairness, and confusion that would result. See Shannon, 512 U.S. at 579. The parties are in agreement as to this prohibition, and further agree that Mr. Watts may cross-examine government witnesses about the consequences of their guilty pleas and allocutions. (Gov. Reply at 1; Watts Opp. at 1 n.1.) The court therefore grants the government's
motion to exclude references to the possible consequences of Mr. Watts' conviction.
3. Limiting Cross-Examination or Direct Testimony Concerning a Government Witness's Treatment For Depression to the Topics Permitted in the First Trial
The government asks the court to limit direct testimony and cross-examination regarding a particular government witness's treatment for depression in the same manner as in the Dupree/Foley trial. ( See Gov. Mem. at 3-4.) The court previously limited cross-examination of this witness regarding mental health treatment to: " (1) the nature and quantity of the medication prescribed; (2) the dates of use; (3) the purpose for which the witness was prescribed the medication; and (4) whether the medication affected the witness's ability to perceive and recall events or to testify accurately about the facts at issue in the case." Dupree, 833 F.Supp.2d at 266.
Mr. Watts responds that he does not intend to cross-examine this particular government witness regarding her/his mental health treatment beyond the limits set by the court in the Dupree/Foley trial. ( See Watts Opp. at 1 n.1.) Thus, the court grants the government's motion to limit direct testimony and cross-examination regarding the particular government witness's treatment for depression to the topics outlined above. In order to balance Mr. Watts' Sixth Amendment right to confront the witness with the interests in minimizing the witness's personal embarrassment and in preventing confusion of the issues by the jury, there shall be no other topics of cross-examination regarding the witness's mental health history, and no documents shall be admitted with respect to prescribed medication.
4. Cross-Examination Regarding Veronica Finn's Husband
The government moves to limit Mr. Watts' cross-examination of expected government witness Veronica Finn (" Finn" ), a former employee of GDC, with regard to Finn's husband Martin Finn, a retired FBI agent. (Gov. Mem. at 4-5.) The government's motion in limine overlaps in sum and substance with Mr. Watts' fifth motion in limine, although the parties advocate differing positions. ( See Watts Mem. at 20-24.) The court addresses the scope of Mr. Watts' cross-examination of Finn in Section IV.5, infra .
5. Direct Testimony or Cross-Examination Regarding Any of the Allegations of Prosecutorial Misconduct in the Dupree/Foley Trial
The government moves to preclude any testimony regarding potential allegations of prosecutorial misconduct on the basis that this court has previously found such allegations to be meritless. (Gov. Mem at 5.) Mr. Watts has indicated that he does not intend to examine witnesses or raise allegations of prosecutorial misconduct that were addressed and precluded by the court prior to the Dupree/Foley trial. (Watts Opp. at 1 n.1 (citing Dupree, 833 F.Supp.2d at 270).) Accordingly, the court grants the government's motion to preclude Mr. Watts from presenting evidence or eliciting testimony during direct or cross-examination regarding potential allegations of prosecutorial misconduct.
6. Admissibility of the Recordings of Mr. Watts as Admissions, and Conditional Admissibility of Recordings of Emilio Serrano and Frank Patello as Non-Hearsay
The government argues that audio recordings of Mr. Watts should be admitted pursuant to Federal Rule of Evidence 801(d)(2)(A).
(Gov. Mem. at 6-7.) Rule 801(d)(2)(A) provides that a statement is not hearsay when it is offered against an opposing party and " was made by the party in an individual or representative capacity." Fed.R.Evid. 801(d)(2)(A); United States v. Russo, 302 F.3d 37, 43 (2d Cir. 2002) (" Statements made by the defendant may be introduced by the government in a criminal trial to prove the truth of the facts stated in them because they are admissions of an adverse party." ); United States v. Reed, No. 10-CR-826, at *6 (E.D.N.Y. Mar. 19, 2012) (granting motion in limine to admit recorded phone calls by defendant as party admissions.) The government notes that tapes 1-7, 3-5, 9-1, 12-7, and parts of tapes 12-5 and 16-7 include statements made by Mr. Watts. (Gov. Mem. at 7.)
Mr. Watts does not specifically dispute the government's argument regarding the admissibility of recordings of him as party admissions. ( See generally Watts Opp.; Watts Mem.) Mr. Watts does, however, argue that recordings of him having conversations about documents that have not been produced by the government should be precluded, infra, Section IV.2. As discussed in Section IV.2, the court disagrees. Based on established law regarding the admissibility of an opposing party's out-of-court statements, the court grants the government's motion in limine with regard to the admissibility of recordings of Mr. Watts. See Russo, 302 F.3d at 43.
The government's motion in limine also addresses the admissibility of recordings between Emilio Serrano (" Serrano" ) and Frank Patello (" Patello" ), two former GDC employees, and overlaps in sum and substance with Mr. Watts' first motion in limine . ( See Gov . Mem at 5-7; Watts Mem. at 4-9.) The court therefore addresses the admissibility of the recordings between Serrano and Patello in Section IV.1, infra .
7. Admissibility of the Testimony of Martha Xenakis, Mark Jozefowski, and Irma Nusfaumer Regarding Pre-Billing in 2007, Fictitious Billing in 2008, and Fictitious Accounts Receivable in 2009
The government's seventh motion in limine involves evidence that is substantially similar to the evidence at issue in the government's eighth motion in limine . Specifically, both motions in limine involve the expected testimony of Irma Nusfaumer (" Nusfaumer" ), and the seventh motion in limine also involves expected testimony of Martha Xenakis (" Xenakis" ) and Mark Jozefowski (" Jozefowski" ). Accordingly, the court addresses both the seventh and eighth motions in the instant section.
The government moves to admit the testimony of Xenakis, Jozefowski, and Nusfaumer, former employees of GDC and GDC subsidiaries, regarding Mr. Watts and Dupree's alleged " pre-billing" in 2007 during GDC's relationship with PNC Bank (" PNC" ), a previous lender to GDC, and testimony by Nusfaumer about fictitious billing in 2008 prior to GDC's relationship with Amalmagated, and fictitious accounts receivable created in 2009 for the purpose of obtaining financing from another company, possibly Siemens. ( See Gov. Mem. at 7-10.) The 2007 dealings between GDC and PNC are not alleged in the indictment, nor are the 2008 pre-Amalgamated fictitious billing or the 2009 attempt to obtain financing from another company. ( See generally S-2 Indictment.) The government initially argued for the admissibility of this evidence of uncharged conduct on two bases: (1) pursuant to Federal Rule of Evidence 404(b), and (2) that this conduct is " inextricably intertwined" with the charged offenses. ( See id. at 8-9.) Rule 404(b)
permits the admission of evidence of uncharged crimes or other wrongful acts for the purpose of proving motive, opportunity, intent, preparation, knowledge, identity, absence of mistake, or lack of accident. Fed.R.Evid. 404(b)(2). Moreover, " evidence of uncharged criminal activity is not considered other crimes evidence under Fed.R.Evid. 404(b) if it arose out of the same transaction or series of transactions as the charged offense, if it is inextricably intertwined with the evidence regarding the charged offense, or if it is necessary to complete the story of the crime on trial."  United States v. Carboni, 204 F.3d 39, 44 (2d Cir. 2000).
The government, in its reply brief and at oral argument, altered its previous argument, additionally contending that the testimony by Xenakis, Jozefowski, and Nusfaumer about pre-billing in 2007, fictitious billing in 2008, and fictitious accounts receivable created in 2009 is evidence of the charged conduct. (Gov. Reply at 9-10, 18; Tr. at 77-78.) The government asserts that the three witnesses are expected to testify that pre-billing in late 2007, prior to the start of the relationship between the GDC subsidiaries and either Amalgamated or C3, was incorporated into the GDC subsidiaries' loan application materials to GDC in 2008. ( See Gov. Reply at 9-10.) According to the government, these witnesses will also testify that Mr. Watts and Dupree were aware of and, in fact, directed this pre-billing, and that they knowingly submitted this information in loan application materials to Amalgamated. ( See id. at 10.) The government next argues that testimony about fictitious billing in 2008 is evidence of charges in the indictment. ( Id. at 18.) Lastly, the government argues that testimony about fictitious accounts receivable in 2009 is evidence both of charged conduct and uncharged conduct regarding attempts to obtain financing from Siemens, and that the evidence " completes the story of the crime on trial." ( Id. at 19.)
Mr. Watts opposes the admissibility of expected testimony by Xenakis, Jozefowski, and Nusfaumer regarding 2007 pre-billing and 2008 fictious sales, contending that such testimony is neither evidence of charged conduct, nor admissible pursuant to Rule 404(b). ( See Tr. at 78-86; Watts Opp. at 9-24.) As detailed below, the court disagrees with Mr. Watts' arguments that this testimony is not evidence of charged conduct.
At oral argument on the motion in limine, Mr. Watts argued that the Second Circuit's recent decision in United States v. Nkansah, 699 F.3d 743 (2d Cir. 2012), dictates that Xenakis, Jozefowski, and Nusfaumer's testimony about 2007 pre-billing is inadmissible because this conduct occurred before GDC became involved with Amalgamated in 2008, and therefore Mr. Watts could not have specifically intended to defraud Amalgamated at the time this conduct took place. ( See Tr. at 79.) As the Nkansah court noted, convictions for bank fraud are limited to situations where the defendant " (1) engaged in a course of conduct designed to deceive a federally chartered or insured financial institution into releasing property; and (2) possessed an intent to victimize the institution by exposing it to actual or potential
loss." 699 F.3d at 748 (internal quotation marks omitted). The court also noted that in the Second Circuit, " where the direct legal exposure to losses is sufficiently well known, a jury may infer that the defendant intended to expose the bank to loss." Id. at 750; United States v. Barrett, 178 F.3d 643, 648 (2d Cir. 1999); United States v. Jacobs, 117 F.3d 82, 93 (2d Cir. 1997). Thus, Mr. Watts is correct that in order for testimony about 2007 pre-billing to be admissible as evidence of the offenses with which he is charged, that testimony must bear on Mr. Watts' intent to defraud Amalgamated or C3.
Mr. Watts, however, misconstrues the timing and nature of the fraudulent intent at issue in this case. Although the 2007 pre-billing occurred some months before GDC applied for loans from Amalgamated in 2008, the question with regard to Mr. Watts' criminal liability for fraud against Amalgamated is what his intent was at the time that he is alleged to have submitted what he allegedly knew to be the falsified 2007 pre-billing data to Amalgamated in connection with the loan. Thus, the fact that the 2007 pre-billing is thought by the government to have originally been undertaken for purposes of an uncharged fraud against PNC is not dispositive of admissibility. What determines the ...