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United States v. Wrobel

United States District Court, W.D. New York

July 21, 2017

United States of America
v.
Arnold Wrobel, Defendants.

          REPORT AND RECOMMENDATION AND DECISION AND ORDER

          HON. HUGH B. SCOTT, UNITED STATES MAGISTRATE JUDGE

         I. INTRODUCTION

         Defendants Arnold Wrobel, Martin Rhys Jones, Monica Romaszko, Gene Clark Foland, Jeffrey G. Klein, Walter Tatum, Joel Marcus, Saad Shuaib, David Cole, Raymond Malizio, Kyle Clayton, and Jamie Lee Church allegedly conspired to trick investors into buying higher-value common stock when they really were buying lower-value restricted stock. The alleged conspiracy manifested itself as a “boiler room” sales operation headquartered in Spain with bank accounts, stock suppliers, and escrow agents located in this District and elsewhere. The Government filed an indictment against all 12 defendants on April 17, 2012. Cole and Clayton remain fugitives as of this writing. Wrobel, Jones, Romaszko, Malizio, and Church have entered guilty pleas and either have been sentenced or await sentencing. Foland, Klein, Tatum, Marcus, and Shuaib have spent time reviewing the considerable amount of discovery and now have filed omnibus dispositive and non-dispositive pretrial motions.

         This case was referred to this Court under 28 U.S.C. § 636(b). (Dkt. No. 2.) The Court held oral argument on June 19, 2017 and allowed for any supplemental disclosures through June 26, 2017. The Court now issues its rulings and recommendations as explained below.

         I. INTRODUCTION ....................................................................................................................... 1

         II. BACKGROUND .......................................................................................................................... 3

         III. DISCUSSION ............................................................................................................................... 5

         A. Jeffrey G. Klein ........................................................................................................................... 5

         i. Motion to Dismiss Indictment (Dispositive) ......................................................................... 5

         ii. Motion for Bill of Particulars (Non-dispositive) .................................................................. 13

         iii. Motion for FRE 404(b) and 609 Material (Non-dispositive) .......................................... 17

         iv. Motion for Notice of Expert Witnesses (Non-dispositive) .............................................. 17

         B. Gene Clark Foland .................................................................................................................. 18

         i. Motion to Dismiss Indictment (Dispositive) ....................................................................... 18

         ii. Motion for Bill of Particulars (Non-dispositive) .................................................................. 19

         iii. Motion for Brady / Jencks / Giglio Material (Non-dispositive) ..................................... 22

         iv. Motion for FRE 404(b) and 609 Material (Non-dispositive) .......................................... 24

         v. Motion for Notice of Expert Witnesses (Non-dispositive) ................................................. 25

         C. Joel Marcus ............................................................................................................................... 26

         i. Motion to Dismiss Indictment (Dispositive) ....................................................................... 26

         ii. Motion for Bill of Particulars (Non-dispositive) .................................................................. 28

         iii. Motion for Grand Jury Disclosures (Non-dispositive) .................................................... 29

         iv. Motion for Severance (Non-dispositive) .......................................................................... 30

         v. Motion for Expert Disclosure (Non-dispositive) ................................................................. 30

         D. Saad Shuaib .............................................................................................................................. 31

         i. Motion to Dismiss Indictment (Dispositive) ....................................................................... 31

         ii. Motion for Grand Jury Disclosures (Non-dispositive) ........................................................ 32

         iii. Motion for Rule 12 and 16 Discovery (Non-dispositive) ................................................ 33

         iv. Motion for Brady / Jencks / Giglio Material (Non-dispositive) ..................................... 33

         v. Motion for Exclusion Under Bruton (Dispositive) ............................................................. 34

         vi. Motion for Bill of Particulars (Non-dispositive) .............................................................. 34

         vii. Motion for Disclosure of Confidential Informants (Non-dispositive) ........................... 35

         viii. Motion for FRE 404(b), 608, and 609 Material (Non-dispositive) ................................. 37

         ix. Motion for Preservation of Notes (Non-dispositive) ....................................................... 37

         x. Motion for Voir Dire of Government Experts (Non-dispositive) ...................................... 38

         E. Walter Tatum ........................................................................................................................... 38

         IV. CONCLUSION .......................................................................................................................... 39

         V. OBJECTIONS ............................................................................................................................. 39

         II. BACKGROUND

         Since the five remaining pretrial defendants have filed a number of motions that will require separate treatment, the Court here will limit its background discussion to the general facts of the case common to all defendants.

         Briefly, this case concerns allegations that defendants conspired to defraud investors by selling shares of corporate stock that they did not have and by passing off restricted stock as common stock. The indictment (Dkt. No. 1) neatly summarizes the alleged conspiracy as follows:

Small, privately held United States corporate entities could issue shares of stock, including freely traded shares which were considered “over-the-counter” trades, and which were reported on the “over-the-counter” bulletin board (“OTCBB”) or “pink sheets.” The OTCBB and pink sheets were quotation mediums that contained quotations for thousands of over-the-counter stocks not listed on any of the major stock markets. Shares which had values considerably less than a dollar per share were sometimes referred to as “penny stock.”
Small, privately held corporate entities could also issue restricted shares, which could not be freely traded, including so-called “Reg S” shares, that is, sales of shares restricted to purchasers outside of the United States. The sales of restricted shares were not reported on the “over the counter” bulletin board or “pink sheets.” Restricted shares had a value far less than that of freely traded shares.
JONES and WROBEL ran a telemarketing operation, sometimes referred to as a “boiler room, ” from a number of locations in Barcelona, Spain. In this operation, callers contacted prospective investors by telephone to sell “over the counter” or “pink sheet” stocks, using high pressure sales tactics and fraudulent statements and representations. The boiler room used a variety of names, beginning with Newbridge International, then Brecon Global, then Strategic Energy Partners, and then Hammerson Equity Group.
The boiler room obtained shares of restricted stock issued by various companies, including Intersecurity Holdings Corporation (“IXSV”); Universal Energy Corporation (“UVEC”); Rhino Outdoor International, later known as Xtreme Motorsports International (“RHOI” and “XTMS”); and Clean Coal Technologies, Inc. (“CCTI” or “CCTC”), which were sold to investors without disclosing the fact ...

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