Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

United States v. Bonventre

United States District Court, Second Circuit

May 28, 2013

UNITED STATES OF AMERICA
v.
DANIEL BONVENTRE et al., Defendants.

MEMORANDUM OPINION AND ORDER

LAURA TAYLOR SWAIN, District Judge.

Defendants Daniel Bonventre ("Bonventre"), Annette Bongiorno ("Bongiorno"), Jo Ann Crupi, ("Crupi"), Jerome O'Hara ("O'Hara") and George Perez ("Perez") (collectively, the "Defendants") are charged in a 33-count Superseding Indictment, S8 10 Cr. 228, filed on October 1, 2012 (the "Indictment, " docket entry no. 273), with conspiring to commit securities fraud, falsifying records of a broker dealer, falsifying records of an investment adviser, mail fraud, making a false filing with the Securities Exchange Commission ("SEC") and certain additional crimes, all arising out of Defendants' allegedly illegal activities as employees of Bernard L. Madoff Securities LLC ("BLMIS").[1] Currently pending before the court are: (1) the five Defendants' joint motion for immediate disclosure of all Brady material, [2] early disclosure of Giglio material, [3] early disclosure of certain material pursuant to Federal Rule of Criminal Procedure 16 and the Jencks Act (18 U.S.C. § 3500) materials, early disclosure of materials that the Government intends to offer into evidence pursuant to Federal Rule of Evidence 404(b), [4] and other relief (docket entry no. 320); (2) Crupi's motion requesting that the trial of her bank and tax fraud counts be severed from that of the other charges against her and that the Government provide her with a bill of particulars (docket entry no. 323); (3) Bonventre's motion requesting that his trial be severed from that of his co-defendants, that his tax- and ERISA-related charges be tried separately from the other charges against him, and that the Government produce all exculpatory information under Brady and certain particulars and discovery (docket entry no. 326); (4) Bongiorno's motion requesting severance of the trial of her tax fraud counts from that of the other fraud counts against her and that the bank fraud and ERISA charges against the other Defendants also be tried separately, and requesting a bill of particulars (docket entry no. 330); and (5) Perez and O'Hara's motion requesting that the trial of charges against them be severed from the trial of the charges against the other Defendants, and that the Government produce a bill of particulars and unredacted Brady material (docket entry no. 333). The Court has reviewed thoroughly the parties' submissions and, for the following reasons, the Defendants' motions are granted in part and denied in part.

BACKGROUND

All five Defendants are charged with crimes allegedly committed in connection with the massive Ponzi scheme that was uncovered around the time of the December 11, 2008, arrest of Bernard L. Madoff. Defendant Bonventre (who was employed with BLMIS from in or about April 1968 through December 2008) had worked at BLMIS as the Director of Operations since the 1980s. (Indictment ¶ 5.) The Government alleges that Bonventre was responsible for, inter alia, maintaining and supervising the production of internal accounting documents and maintaining the Stock Record for BLMIS and for supervising certain BLMIS employees, including Defendants O'Hara and Perez insofar as their work related to the production of the General Ledger and other accounting records. (Id.) Bonventre is charged with conspiracy to commit securities fraud, to falsify records of a broker dealer and of an investment adviser, to commit mail fraud (the "Main Conspiracy Charges"), conspiracy to make false filings with the SEC, conspiracy to obstruct and impede the lawful government function of the Internal Revenue Service ("IRS"), conspiracy to falsify statements in relation to ERISA documents, [5] securities fraud, falsifying records of a broker dealer and falsifying records of an investment adviser, filing false documents with the SEC, bank fraud, falsifying statements in relation to ERISA documents, filing false individual income tax returns and obstructing and impeding the due administration of internal revenue laws. Bongiorno (who was employed at BLMIS from approximately 1968 to December 2008) and Crupi (who was employed at BLMIS from approximately 1983 to December 2008) worked in BLMIS's Investment Advisory ("IA") business, managing the IA accounts. (Indictment ¶¶ 7, 10.) Bongiorno is charged with the Main Conspiracy Charges, securities fraud, falsifying records of a broker dealer, falsifying records of an investment adviser, tax evasion, and obstructing and impeding the due administration of internal revenue laws, and Crupi is charged with the Main Conspiracy Charges, securities fraud, falsifying records of an investment adviser, falsifying records of a broker dealer, conspiracy to commit bank fraud, bank fraud and tax evasion. The Government alleges that O'Hara and Perez (who were employed at BLMIS from 1990 and 1991, respectively, to December 2008) worked as computer programmers and created custom-designed computer programs that were used to facilitate the fraud. (Id. ¶ 13.) Both O'Hara and Perez are charged with the Main Conspiracy Charges, securities fraud, falsifying records of an investment advisor and falsifying records of a broker dealer.

DISCUSSION

Severance Motions

Typically, in this jurisdiction, "[alt]hough Rule 8(a) addresses joinder of offenses and Rule 8(b) concerns joinder of defendants, when a defendant in a multi-defendant action challenges joinder, whether of offenses or defendants, the motion is construed as arising under Rule 8(b)." United States v. Ohle , 678 F.Supp.2d 215, 224 (S.D.N.Y. 2010) (quoting United States v. Stein , 428 F.Supp.2d 138, 141 (S.D.N.Y. 2006)). Joinder is proper under Rule 8(b) "only when the charged offenses are either (1) unified by some substantial identity of facts or participants, ' or (2) arise out of a common plan or scheme.'" Id. at 224 (quoting United States v. Attanasio , 870 F.2d 809, 815 (2d Cir. 1989)).

Under Federal Rule of Criminal Procedure 14(a), courts have the discretion to sever trials, even when the defendants and charges are properly joined. See United States v. Stewart , 433 F.3d 273, 314 (2d Cir. 2006) (decision whether or not to grant severance is within the sound discretion of the trial court and "virtually unreviewable"). When bringing a severance motion under Rule 14(a), the defendant bears the heavy burden of showing "facts demonstrating that he will be so severely prejudiced by a joint trial that it would in effect deny him a fair trial[, ]... not that he might have had a better chance for acquittal at a separate trial." United States v. An-Lo , 851 F.2d 547, 556 (2d Cir. 1988) cert. denied, 488 U.S. 966 (1988) (internal quotation marks and citation omitted). "There is a preference in the federal system for joint trials of defendants who are indicted together." Zafiro v. United States , 506 U.S. 534, 537 (1993). Moreover, "it is well established that differing levels of culpability and proof are inevitable in any multi-defendant trial and, standing alone, are insufficient grounds for separate trials.'" United States v. Todd, No. 12 Cr. 45(RJS), 2013 WL 499857, at *10 (S.D.N.Y. Jan. 28, 2013) (citation omitted); see also United States v. Rosa , 11 F.3d 315, 341 (2d Cir. 1993) ("[t]he principles that guide [a] district court's consideration of a motion for severance usually counsel denial;" a severance motion should be granted "only if there is a serious risk that a joint trial would compromise a specific trial right of the moving defendant or prevent the jury from making a reliable judgment about guilt or innocence").

Motions to Sever Trials of Defendant Bonventre and of Defendants O'Hara and Perez Defendant Bonventre moves, pursuant to Federal Rule of Criminal Procedure 14, to be tried separately from the other Defendants. Bonventre asserts that, if he is tried with the other Defendants, evidence pertaining to the IA business, in which Bonventre alleges that he was not directly involved, coupled with the magnitude of the underlying Ponzi scheme, will overwhelm the jury, resulting in spillover prejudice against him. Perez and O'Hara also jointly move, pursuant to Rule 14, to be tried separately from the other Defendants. Perez and O'Hara contend that they only joined BLMIS in the early 1990s (whereas the other Defendants had been employed with BLMIS since at least the early 1980s) and that they were merely computer programmers while the other Defendants were more intimately involved in the fraudulent financial transactions that were allegedly perpetuated at BLMIS. Moreover, according to Perez and O'Hara, the exculpatory material turned over thus far undermines the Government's case against them and further attenuates the connection between them and the other Defendants, as the evidence demonstrates that Bernard Madoff and Frank DiPascali lied to O'Hara and Perez and hid the fraudulent activities from them.

The Indictment charges that Bonventre, O'Hara and Perez were integral participants in the securities fraud and related schemes and were involved in creating documents to deceive regulators, auditors and the IA clients. (See Indictment ¶¶ 47-104.) For example, Paragraph 65 alleges that "Jerome O'Hara and George Perez, the defendants, also developed and maintained Special House 17 Programs, that in connection with the 2004, 2005 and 2006 SEC Reviews, enabled Madoff and DiPascali to change information about trades that purportedly already had occurred." (id. at ¶ 65). Paragraph 58 alleges that, "[b]eginning at least as early as in or about December 2003, in connection with the ["European Accounting Firm" and SEC] Reviews, Madoff and/or DiPascali caused Daniel Bonventre, Joann Crupi, a/k/a Jodi, ' Jerome O'Hara and George Perez, the defendants, Enrica Cotellessa-Pitz, Eric Lipkin and others, to create additional false and fraudulent BLMIS books and records." (Id. at ¶ 58). Although O'Hara and Perez contend that they were repeatedly misled by DiPascali and Madoff, the Government alleges that O'Hara and Perez knew about the fraud and in fact, took raises and salary bonuses in exchange for keeping quiet. (Id. ¶¶ 112-114.) The Government further asserts that a substantial amount of the evidence regarding the participation of Bonventre, O'Hara, Perez, Bongiorno and Crupi in the larger fraud is overlapping and, thus, that severing the trial of O'Hara and Perez will result in the duplicative and inefficient use of judicial and governmental resources.

The Court finds that the charges against all of the Defendants are sufficiently interconnected to warrant trying all of the Defendants jointly. Bonventre, O'Hara and Perez have not shown that a joint trial with the other Defendants will prejudice them to a degree amounting to a miscarriage of justice. See Rosa , 11 F.3d at 341. Moreover, proper limiting instructions to the jury will protect against any prejudice arising from a joint trial. See United States v. Page , 657 F.3d 126, 129 (2d Cir. 2011) ("less drastic measures [than severance], such as limiting instructions, often will suffice to cure any risk of prejudice and permit joinder") (internal quotation marks and citation omitted)); United States v. DeVillio , 983 F.2d 1185, 1192-93 (2d Cir. 1993) (admission of evidence relating to an attempted murder by only some of the defendants was not sufficiently prejudicial to the others so as to have warranted severance when a limiting instruction was given). Accordingly, Bonventre, O'Hara and Perez's motions for severance of their trials from that of the other Defendants are denied.

Bonventre, Bongiorno and Crupi's Motions to Sever Certain Charges

Bonventre, Bongiorno and Crupi also ask the Court to sever the trial of their tax, ERISA and bank fraud counts from the trial of the other charges against them. Bonventre moves pursuant to Federal Rule of Criminal Procedure 8, requesting that the seven counts charging him with filing false individual tax returns for the years 2003 to 2007, with the exception of 2005 (Counts 20 through 23 of the Indictment), tax fraud relating to his alleged participation in the falsification of Bernard Madoff's taxes (Counts 4 and 24) and the ERISA charges relating to the "no-show job" that he allegedly obtained for his son (Counts 5 and 19) be severed from the rest of the charges against him because, he contends, they are insufficiently connected to the underlying fraud perpetrated at BLMIS or the process of concealing that fraud. Bongiorno also moves for severance of the five counts of tax evasion against her for the years 2004 to 2008 (Counts 25 through 29), as well as her one count of obstructing and impeding the due administration of internal revenue law (Count 30) from the trial of her securities fraud and records falsification charges. Bongiorno contends that the accounts from which the unreported payments to her were made were not part of the larger scheme, were not reflected in BLMIS's records and had no relationship to securities fraud or to her allegedly phony trading profits. Bongiorno also requests that the bank fraud and ERISA counts against her co-defendants Crupi and Bonventre (Counts 16 through 19) be excluded from any joint trial, characterizing those charges as "one off" crimes that were not part of the alleged common scheme. She asserts that there is no allegation that Bongiorno did anything to assist in the commission of those other crimes, and that she will suffer spillover prejudice from the Government's evidence against her co-defendants. Crupi moves to have the trial of the tax counts against her which are based on personal charges that she allegedly incurred on a corporate American Express card and failed to declare on her income tax returns (Counts 31 to 33), and the bank fraud counts against her for allegedly creating false documents used by David Kugel and others in securing personal loans from the banks (Counts 16 and 17), severed from the trial of the rest of the charges against her.

"[J]oinder is proper where two or more persons' criminal acts are unified by some substantial identity of facts or participants, or arise out of a common plan or scheme. In this context, [the Court] also appl[ies] a commonsense rule to decide whether, in light of the factual overlap among charges, joint proceedings would produce sufficient efficiencies such that joinder is proper notwithstanding the possibility of prejudice to [one or more] of the defendants resulting from the joinder." United States v. Rittweger , 524 F.3d 171, 177 (2d Cir. 2008) (internal quotation marks and citations omitted). "[T]ax counts can properly be joined with non-tax counts where it is shown that the tax offenses arose directly from the other offenses charged" or, when the link between the two offenses is that "one scheme stemmed from the other[, ]... that link provides a sound basis for joinder under Rule 8(b)." United States v. Turoff , 853 F.2d 1037, 1043 (2d Cir. 1988) (holding that "the tax fraud hinged on the fraudulent activities taken to advance the... conspiracy" and so "the proof of one scheme is indispensable for a full understanding of the other"). Any defendant seeking to sever counts "under Rule 14 carries a heavy burden of showing that "joinder will result in substantial prejudice, " as "[t]he danger that Rule 14 authorizes a district judge to cure is not merely that the jury will think worse of a defendant charged with two crimes rather than one, but that the jury will use the evidence cumulatively." United States v. Ezeobi, No. 10 Cr. 669(DLC), 2011 WL 3625662, at *2 (S.D.N.Y. Aug. 17, 2011).

According to the Government, each of the tax fraud, ERISA fraud and bank fraud counts reflects one or more of the means through which Bernard Madoff compensated the Defendants, or allowed them to enrich themselves, in order to ensure their continued participation in the fraudulent investment scheme. The Government alleges that the ways in which Defendants were enriched included: "profits" from fake backdated trades that came out of the Ponzi scheme account and from sham IA brokerage accounts with negative balances; personal charges on the corporate charge card; and the creation of no-show jobs for the Defendants' family members. The culture of impunity that existed at BLMIS, according to the Government, enabled and encouraged these secondary crimes, and such crimes also helped facilitate the continuance of the securities fraud Ponzi scheme. Furthermore, the Government contends ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.