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United States v. Riley

United States District Court, Second Circuit

January 7, 2014

UNITED STATES OF AMERICA,
v.
DAVID RILEY and MATTHEW TEEPLE, Defendants.

OPINION & ORDER

ROBERT P. PATTERSON, Jr., District Judge.

I. Introduction

Defendant David Riley ("Riley") and Defendant Matthew Teeple ("Teeple") (collectively, the "Defendants") stand indicted with one count of conspiracy to commit securities fraud and three counts of substantive securities fraud.

On October 28, 2013, Teeple filed six pretrial motions. (See Notice of Def. Matthew Teeple's Pre-Trial Mots. ("Teeple Mots."), ECF No. 33.) These included (1) a motion to dismiss the Indictment for improper venue (joined by Riley); (2) a motion to suppress items seized pursuant to a search warrant and for a Franks hearing; (3) a motion for trial severance or for other relief from prejudicial joinder; (4) a motion to exclude testimony about John Johnson's guilty plea and entry into a cooperation agreement with the Government, based upon the Defendants' proposed stipulation that they would not impeach Johnson on these grounds; (5) a motion to compel the Government to disclose Brady material and additional discovery; and (6) a motion to dismiss the Indictment for failing to allege essential elements of the crimes charged (joined by Riley). (See id.)

Riley filed four additional motions on October 28, 2013: (1) for an order directing the Government to provide a bill of particulars, (2) for an order directing the Government to provide a list of trial witnesses, a list of trial exhibits, and Rule 404(b) evidence sixty days before trial, (3) for an order directing the Government to provide Brady material, and (4) for severance of the trial of Riley from that of Teeple. (See Def. David Riley's Mem. of Law in Supp. of Pre-Trial Mots. ("Riley Mem."), ECF No. 24.)

The Government filed a memorandum in opposition to the Defendants' motions on November 19, 2013. (See Mem. in Opp'n by USA ("Gov't Mem."), ECF No. 41.) Defendants Teeple and Riley filed reply memoranda of law on November 26, 2013 and November 27, 2013, respectively. (See Def. Matthew Teeple's Reply Mem. of Law ("Teeple Reply"), ECF No. 43; Def. David Riley's Reply Mem. of Law ("Riley Reply"), ECF No. 45.)

During oral argument on December 4, 2013, the Court denied all of Teeple's motions, except the motion to dismiss the Indictment for failure to show venue, as to which the Court reserved decision. (See Tr. of Proceedings as to David Riley, Matthew Teeple ("12/4/13 Tr.") at 109, ECF No. 51.) Specifically, the Court denied Teeple's motion to suppress seized items and for a Franks hearing, regarding certain items seized pursuant to a search warrant (id. at 32); denied Teeple's motion for trial severance (id. at 43); denied Teeple's motion to exclude evidence concerning John Johnson's guilty plea and cooperation agreement, subject to the Defendant's right to raise the matter again at the time of trial (id. at 61); denied Teeple and Riley's motion to dismiss the Indictment for failing to allege essential elements of the crimes charged (id. at 79); and denied Teeple's motion for an order directing the Government to provide Brady material, but did order the Government "to provide any Brady material as soon as they get it" and allowed Teeple to supplement this motion with more specific requests as to identified witnesses, should any witnesses refuse to provide him with "material" and "important" Brady information.[1] (Id. at 94-95.) As to Defendant Riley's motions, the Court ordered the Government to provide a list of trial witnesses, a list of trial exhibits, and Rule 404(b) evidence by March 3, 2014 (id. at 108), and ordered the Government to produce 3500 material on March 31, 2014, two weeks prior to trial, which is scheduled to begin on April 14, 2014. (Id. at 109.)

The Court did not rule on Riley and Teeple's motion to dismiss the Indictment for lack of venue, and instead, took the motion under advisement.[2] For the reasons that follow, that motion is denied.

II. Factual Background

On March 8, 2013, the grand jury returned an indictment (the "Indictment") charging the Defendants with one count of conspiracy to commit securities fraud, in violation of Title 15, United States Code, Sections 78j(b) and 78ff, and Title 17, Code of Federal Regulations, Sections 240.10b-5 and 240.10b5-2, and three counts of substantive conspiracy fraud, in violation of Title 15, United States Code, Sections 78j(b) and 78ff; Title 17 Code of Federal Regulations, Sections 240.10b-5 and 240.10b5-2; and Title 18, United States Code, Section 2. (Indictment filed as to David Riley, Matthew Teeple ("Indictment") ¶¶ 18, 19, 23, ECF No. 13.)

The charges in the Indictment relate to an alleged scheme to trade in securities of Foundry Networks, Inc. ("Foundry") based on material, nonpublic information ("MNPI"). (Id. ¶ 7.) Specifically, the Indictment alleges that from 2005 to 2008, Riley, while employed as a Vice-President and the Chief Information Officer at Foundry, obtained MNPI regarding Foundry, including information concerning an eventual acquisition of Foundry by Brocade Communications Systems, Inc. ("Brocade"). (Id.) It also alleges that Riley provided MNPI to Teeple, who was employed as an analyst for "Investment Adviser A, " and that Teeple then caused Investment Advisor A to execute securities transactions in Foundry based in whole or in part on MNPI that Riley had provided to him. (Id. ¶¶ 2, 7.) The Indictment alleges that Investment Adviser A "used a prime broker located in New York, New York, among other things, to trade shares of Foundry."[3] (Id. ¶ 2; see also id. ¶¶ 18, 21, 23 (alleging Teeple and Riley acted "in the Southern District of New York and elsewhere").) It is further alleged that Investment Adviser A earned profits in excess of $16 million and avoided losses in excesses of $11 million because of these trades. (Id. ¶ 7.) Teeple is also alleged to have caused others to execute securities transactions in Foundry based upon MNPI obtained from Riley during the same period. (Id.)

III. Legal Standard

The United States Constitution requires that "[t]he Trial of all Crimes... shall be held in the State where the said Crimes shall have been committed, " U.S. Const. art. III, § 2, cl. 3, and provides that a defendant has the right to trial in "the district wherein the crime shall have been committed." U.S. Const. amend. VI; see also United States v. Beech-Nut Nutrition Corp. , 871 F.2d 1181, 1188 (2d Cir. 1989). The Second Circuit has applied a "substantial contacts" analysis to determine where an offense is committed - taking into account "the site of the defendant's acts, the elements and nature of the crime, the locus of the effect of the criminal conduct, and the suitability of each district for accurate fact-finding." United States v. Reed , 773 F.2d 477, 481 (2d Cir. 1985). Where "the acts constituting the crime and the nature of the crime charged implicate more than one location, the constitution does not command a single exclusive venue." Id. at 480. Rather, "venue is properly laid in any of the districts where an essential conduct element of the crime took place." United States v. Ramirez , 420 F.3d 134, 139 (2d Cir. 2005).

At trial, the Government bears the burden of proving venue by a preponderance of the evidence. United States v. Potamitis , 739 F.2d 784, 791 (2d Cir. 1984). However, in order to satisfy its burden with regard to pleading venue, the Government "need only allege that criminal conduct occurred within the venue, even if phrased broadly and without a specific address or other information.'" United States v. Ohle , 678 F.Supp.2d 215, 231 (S.D.N.Y. 2010) (citing United States v. Bronson, No. 05 Cr. 714 (NGG) , 2007 WL 2455138, at *4 (E.D.N.Y. Aug. 23, 2007). Where venue is challenged on a pretrial motion to dismiss, "the Government's burden is limited to showing that the indictment alleges facts sufficient to support venue." United States v. Peterson , 357 F.Supp.2d 748, 751 (S.D.N.Y. 2005). "The ...


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