Opinion
No. S1 00CR 389 (RCC).
December 13, 2000.
OPINION AND ORDER
Defendant Carol C. Martino ("Martino") brings a number of pre-trial motions before the Court, seeking dismissal of certain counts of the indictment as well as various orders relating to discovery. The six-count indictment charges that Martino evaded a substantial amount of income tax owed to the government, in connection both with her personal returns and with returns filed on behalf of CMA Noel, Ltd. ("CMA Noel"), a corporation wholly-owned by Martino. Martino first argues for dismissal on the basis that venue in the Southern District of New York is improper with respect to counts two, three and six of the indictment. In addition, in response to the filing of a superseding indictment, Martino moves to dismiss counts two and three as impermissibly duplicitous. Irrespective of the outcome of those motions, Martino requests that the Court transfer the case in its entirety to the Southern District of Florida pursuant to Fed.R.Crim.P. 21(b).
With respect to discovery, Martino seeks orders directing that the government, at least six weeks prior to trial: (1) furnish its list of proposed witnesses and exhibits; (2) turn over impeachment material; and (3) provide notice pursuant to Federal Rule of Evidence 404(b). Martino further seeks leave to take a videotaped deposition of a foreign witness for use at trial. The government also submits its own discovery motion, requesting that the Court issue a letter rogatory to the government of Luxembourg.
For the reasons set forth below, Martino's motions to dismiss certain counts of the indictment for lack of venue and for duplicity are denied. The Court finds, however, that the interest of justice requires transfer of the case in its entirety to the Southern District of Florida. Consequently, the Court believes that Martino's requests for discovery in advance of trial should be handled by the transferee court. However, in order to assist in a fast and efficient disposition of this matter, the Court will grant at this time the parties' unopposed motions with respect to the videotaped deposition and the Luxembourg letter rogatory.
I. VENUE
Pursuant to the U.S. Constitution and the Federal Rules of Criminal Procedure, an accused has the right to be tried in a "district wherein the crime shall have been committed." U.S. Const., amend. VI; see also U.S. Const., Art. III, § 2; Fed.R.Crim.P. 18. Where the alleged crime is deemed a continuing offense — i.e., occurring over space and time rather than a discrete incident — venue is proper in any district where the offense was "begun, continued, or completed." 18 U.S.C. § 3237(a). Thus, several districts may provide a proper forum for prosecution of this case. See United States v. Beech-Nut Nutrition Corp., 871 F.2d 1181, 1188 (2d Cir. 1989). With respect to counts two, three and six of the indictment, venue is appropriate here in the Southern District of New York.
The prosecution bears the burden of showing at trial, by a preponderance of the evidence, that some part of the crime was committed within this district. See United States v. Maldonado-Rivera, 922 F.2d 934, 968 (2d Cir. 1990), cert. denied, 501 U.S. 1211 (1991). Prior to trial, "it suffices for the government to allege with specificity that the charged acts support venue in this district." United States v. Long, 697 F. Supp. 651, 655 (S.D.N.Y. 1988); see also United States v. Castellano, 610 F. Supp. 1359, 1388-89 (S.D.N.Y. 1985) ("At this stage of the proceedings, however, the government need only allege, with sufficient specificity, that venue is appropriate by reason of the commission of the charged acts in the Southern District."). The Court may consider additional documents that have been submitted but cannot give any weight to contrary factual assertions made by the defendant. See U.S. v. MacWeeney, No. 00 Cr. 223 (SHS), 2000 WL 1634400, at *2 (S.D.N.Y. Oct. 31, 2000); United States v. Rogers, No. 90 Cr. 377 (CSH), 1991 WL 90797, at *3 (S.D.N.Y. May 21, 1991).
With respect to the charged crimes of tax evasion and subscribing to false returns, Congress did not expressly include venue provisions in the statutes. See, e.g., 26 U.S.C. § 7201, 7206(1). In the absence of an explicit provision, the Second Circuit has articulated a "substantial contacts" test which assesses a number of factors — 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). In tax cases such as this, the government generally must show that the defendant engaged in some affirmative act in this district with a tax evasion motive. See United States v. Strawberry, 892 F. Supp. 519, 521 (S.D.N.Y. 1995); see also United States v. Slutsky, 487 F.2d 832, 839 (2d Cir. 1973), cert. denied, 416 U.S. 937 (1974); United States v. DeFabritus, 605 F. Supp. 1538, 1544 (S.D.N.Y. 1985).
Both parties concur that sufficient affirmative acts include the preparation, signing or filing of the tax returns. In addition, the parties agree that venue may be had in any district where the tax preparer received false information from the taxpayer. See Memorandum of Law in Support of Defendant Carol C. Martino's Omnibus Pretrial Motions ("Def. Mem."), at 5; Government's Memorandum of Law in Opposition to Defendant's Pretrial Motions ("Gov't Mem."), at 16. The government, however, argues that the above-mentioned acts are not exhaustive. Referring to the Supreme Court's opinion in Spies v. United States, 317 U.S. 492 (1943), the government maintains that an "attempt to evade" should be read broadly. Thus, according to the government, venue in tax evasion cases is not limited to the place of filing, signing or preparation, but rather is appropriate wherever the defendant commits an affirmative act, such as concealing assets or preparing underlying documents. See Strawberry, 892 F. Supp. at 524 (although returns were prepared, signed and filed in California, "allegations that [defendant]'s attempt to evade tax by means including the receipt of cash in the Southern District sufficiently allege an affirmative act of attempted evasion"); De Fabritus, 605 F. Supp. at 1543-44 ("The act of attempted evasion, however, consists not only of the preparation and filing of the return, but the preparation of the underlying documents supporting the return.").
In Spies, the Supreme Court considered only whether the failure to file a tax return could constitute an "attempt to evade," and did not address venue issues. The Supreme Court determined that a willful attempt to defeat and evade taxes may be inferred from conduct "such as keeping a double set of books, making false entries or alterations, or false invoices or documents, destruction of books or records, concealment of assets or covering up sources of income, handling of one's affairs to avoid making the records usual in transactions of the kind, and any conduct, the likely effect of which would be to mislead or conceal."Spies, 317 U.S. at 499.
Martino initially moved to dismiss counts two and three of the indictment (referring to Martino's personal amended tax returns for years 1994 and 1995, respectively) on the grounds that the returns were not prepared, signed or filed in New York, and that Martino provided the necessary information only to her accountants in Florida. Def. Mem. at 6. Subsequently, the government obtained a superseding indictment which included Martino's original tax returns as additional bases for the charges. See Castellano, 610 F. Supp. at 1389 (noting that even if the indictment is insufficient on its face, the government may establish venue by amending the indictment).
According to the government, Martino's original 1994 return was filed in Holtsville, New York, the IRS filing center designated for all New York residents, and on that return she reported her address as 225 Rector Place, Apt. 9J, New York, New York. See Declaration of Jason Sabot dated August 10, 2000 ("Sabot Dec."), at ¶ 12 Ex. C. The original returns for years 1994 and 1995 were prepared and signed by Roy Northrup, an accountant based both in New York and New Jersey, whose address is listed on both documents as 17 Battery Place, New York, New York. Id. at Exs. C D. The government also claims that Martino herself resided in New York at the Rector Place address from in or about 1993 through in or about part of 1995. Superseding Indictment at ¶ 2. Although Martino disputes that fact, at this point in the proceedings the Court must accept as true the allegations set forth in the indictment. Thus, even under the more restrictive view of venue advocated by the defense, the government has put forth sufficient allegations to suggest that the tax returns, at least in part, were prepared and signed in the Southern District so as to support venue here.
Defendant suggests that the government will be unable to prove at trial that Martino or Northrup took any action in New York with respect to the returns. In such a scenario, a defendant could challenge venue again pursuant to Fed.R.Crim.P. 29. See United States V. Kham, 821 F.2d 90, 93 (2d Cir. 1987). of course, because the Southern District of Florida will take charge of the proceedings from this point forward, venue will no longer be an issue at trial.
Prior to the filing of the superseding indictment, the government had based its venue argument primarily upon the allegation that Martino deposited almost all of her evaded income into a bank account at Chase Manhattan Bank in New York (the "Chase account"). The Court need not determine at this time whether the use of the Chase account, standing alone, constitutes an affirmative attempt to evade which is sufficient to support venue in this district. The Court notes, however, as argued by the government, that the Chase account was the "primary conduit" for undeclared income until at least November 1995. Gov't Mem. at 6 n. 2. From December 1992 through January 1996, Martino had the account statements mailed to the Rector Place address. See Sabot Dec. at ¶ 7. Martino acknowledges that she sent faxes, placed phone calls and directed wire transfers to Chase Bank in Manhattan. See Affidavit of Carol C. Martino dated September 7, 2000 ("Martino Aff. II"), at ¶ 10. These acts, if proven at trial, would seem to suggest that Martino's alleged scheme to evade her taxes was carried out at least in part in New York. See United States v. Korolkov, 870 F. Supp. 60, 63-64 (S.D.N.Y. 1994) (denying pre-trial motion to dismiss on venue grounds where government alleged that bank accounts were located in New York, although defendant's acts with respect to those accounts occurred outside this district).
Defense counsel cites Korolkov for the proposition that transferring money in and out of a bank account is insufficient for venue purposes. See Transcript of Oral Argument at 38. This reading of Korolkov is flawed. In Korolkov, the defendant claimed that the accounts at issue were physically located outside the district, and that wire transfers between the accounts were merely routed through New York by the bank and thus did not provide a sufficient connection with this forum. The court declined to dismiss the indictment, holding only that the defendant could raise her motion again if the government failed to prove that the accounts actually were located in New York. Korolkov, 870 F. Supp. at 63.
Martino also moves to dismiss count six of the indictment, which charges that Martino falsely subscribed to CMA Noel's 1995 tax return. The venue analysis for false subscribing is analogous to that under the tax evasion counts. See United States v. Rooney. 866 F.2d 28, 31 (2d Cir. 1989). Martino argues that the return at issue was not prepared, signed, received or filed in the Southern District. However, as alleged by the government, Martino undertook a number of other affirmative acts that demonstrate substantial contact with this district. Namely, the government claims that Martino received bills in connection with alleged fraudulent business deductions at the Rector Place address; used that address in correspondence with certain contractors; and continued to pay checks for these deducted expenses out of the Chase account. In addition, Martino also listed the New York address on CMA Noel's application for an extension of time to file the 1995 return. These allegations, taken as true, suggest that the bills, checks and correspondence which underpin a number of the disputed deductions were collected and channeled through this district by Martino. Moreover, Martino presumably relied upon these underlying documents when making and subscribing to her return. Thus, venue is proper at this stage of the proceedings.
II. DUPLICITY
Martino also takes issue with the superseding indictment filed by the government. The superseding indictment is essentially identical to its predecessor, except that counts two and three now reference Martino's original returns in addition to the amended returns cited in the previous indictment. Martino argues that the revised counts are impermissibly duplicitous because they join two or more distinct crimes in a single count. See, e.g., United States v. Margiotta, 646 F.2d 729, 732 (2d Cir. 1981); United States v. Murray, 618 F.2d 892, 896 (2d Cir. 1980).
Count two now alleges that Martino attempted to evade her taxes for 1994 by the filing of both her original return and her amended return for that year. Likewise, count three now alleges that Martino attempted to evade her taxes for 1995 by the filing of both her original return and her amended return for that year.
As Martino acknowledges, acts that may be punished separately are not required to be stated in separate counts. See Margiotta, 646 F.2d at 732. Generally, the Court should concern itself only where certain policy considerations are implicated. See United States v. Ortega, No. 00 Cr 432 (DLC), 2000 WL 1577193, at *2 (S.D.N.Y. Oct. 23, 2000). These concerns include "avoiding the uncertainty of whether a general verdict of guilty conceals a finding of guilty as to one crime and a finding of not guilty as to another, avoiding the risk that the jurors may not have been unanimous as to any one of the crimes charged, assuring the defendant adequate notice, providing the basis for appropriate sentencing, and protecting against double jeopardy in a subsequent prosecution."Margiotta, 646 F.2d at 733. Martino contends that the unanimity consideration is paramount here, because some members of the jury may find Martino guilty on the basis of the amended returns only, while others may base their decision solely on the original returns.
Dismissal is not appropriate here. First, the government may charge multiple acts in a single count where the acts can be characterized as part of a single continuing scheme. See United States v. Aracri, 968 F.2d 1512, 1518 (2d Cir. 1992); see also Margiotta, 646 F.2d at 733 (allowing 50 mailings to be charged in one mail-fraud count, where the mailings furthered a common scheme). Martino's submission of two successive returns, both containing substantially similar information, are acts in furtherance of Martino's alleged attempt to evade her taxes for the particular tax year in question. Courts have upheld indictments that charge multiple acts of tax evasion in a single count. See United States v. Huguenin, 950 F.2d 23, 26 (1st Cir. 1991) (tax evasion count was not duplicitous although based upon the following multiple acts: (1) failure to file return, (2) non-payment of taxes, (3) filing of false W-4 form and (4) filing of false affidavit); United States v. Mal, 942 F.2d 682, 686 (9th Cir. 1991) (tax evasion count could encompass evasion of both the assessment and the payment of taxes); see also United States v. Girard, 601 F.2d 69, 72 (2d Cir. 1979) (receipt and sale of four different sets of records could be charged in a single count). Indeed, courts even permit tax evasion covering several years to be charged as one count. See, e.g, United States v. Shorter, 809 F.2d 54, 56 (D.C. Cir. 1987) (single count of tax evasion may span twelve years).
Martino points to the time gap between the filing of the original and amended returns for tax years 1994 and 1995 (three and two years, respectively), and argues that the differential obviates any finding of a continuing scheme. Martino cites no authority for this argument and the Court rejects it. The Court notes that the amended returns, although filed some years later, contain similar representations and pertain to the same tax year as their earlier counterparts.
Second, Martino's unanimity argument is not persuasive here. The amended returns essentially reiterate the same information contained in the original returns and reflect only small increases in Martino's reported adjusted gross income. This similarity decreases the possibility that the jury will find that one return contains false information, but not the other. In addition, courts may employ jury instructions and special verdict forms to remedy potential unanimity problems. See Margiotta, 545 F.2d at 733; States v. Gordon, 990 F. Supp. 171, 179 (E.D.N.Y. 1998). Although this adds to the jury's burden, the Court will not dismiss counts two and three where, as here, these options are available.
III. TRANSFER
Although venue is proper in this district, the Court must decide whether, in fairness, the trial should be held here. Martino urges transfer of this case to the Southern District of Florida. Under Rule 21(b) of the Federal Rules of Criminal Procedure, the proceedings may be transferred to another district "[f]or the convenience of parties and witnesses, and in the interest of justice." Fed.R.Crim.P. 21(b). In order to determine whether the transfer is warranted, courts consider the following factors:
(1) location of the defendant; (2) location of possible witnesses; (3) location of events likely to be in issue; (4) location of documents and records to be involved; (5) disruption of defendant's business unless the case is transferred; (6) expense to the parties; (7) location of counsel; (8) relative accessibility of place of trial; (9) docket condition of each district or division involved; and (10) any other special elements which might affect the transfer.Platt v. Minnesota Mining Manufacturing Co., 376 U.S. 240, 243-44 (1964); see also Maldonado-Rivera, 922 F.2d at 966. The moving party has the burden of setting forth facts sufficient to warrant transfer. See United States v. Persico, 621 F. Supp. 842, 858 (S.D.N Y 1985); United States v. Aronoff, 463 F. Supp. 454, 460 (S.D.N.Y. 1978) ("the burden is on the moving defendant to justify a transfer under Rule 21(b)"). While none of the above factors is, by itself, dispositive, "it remains for the court to try and strike a balance and determine which factors are of greatest importance." United States v. Stephenson, 895 F.2d 867, 875 (2d Cir. 1990).
A number of the listed factors simply should not carry significant weight in this proceeding. For example, given the conveniences of modem transportation and communication, consideration of the location of documents and the relative accessibility of the courthouses does not tip the balance in favor of either party. Nor is there such a disparity in docket conditions so as to warrant transfer. Although Martino suggests that the docket in the Southern District of Florida is less congested, the government argues that this district has greater experience with complex financial cases and in fact received fewer criminal filings per judge last year.
For the 12-month period ending September 30, 1999. the Southern District of New York received 15, 106 total filings, compared with 8, 424 total filings in the Southern District of Florida. Judges in the Southern District of New York oversaw more pending matters than their Florida counterparts. However, the Southern District of Florida took on 93 criminal filings per judge last year, as opposed to only 48 in this District. See Def. Mem. at 16 (citing the Judicial Caseload Profile published by the Administrative Office of the U.S. Courts).
Most relevant here is the location of the defendant. Courts in this district have accorded "greater weight to the defendant's interest in being tried in the district of his residence than to any other factor."United States v. Ohran, No. 99-Cr-142 (JSM), 2000 WL 620217, at *3 (S.D.N.Y. May 12, 2000); See also United States v. Russell, 582 F. Supp. 660, 662 (S.D.N Y 1984) ("wherever possible, defendants should be tried where they reside"). Martino currently lives with her husband in Palm Beach, Florida, thus favoring transfer. Although there is some dispute as to when Martino took up residence in Florida on a full-time basis, it is undisputed that Martino has resided there officially since 1994. Martino Aff. II at ¶ 3.
Although the government points to a countervailing presumption favoring prosecution in the original district, this factor does not outweigh consideration of the defendant's residence. With respect to tax evasion cases in particular, Congress expressed a preference that such cases be tried in the home district of the defendant by enacting 18 U.S.C. § 3237(b), which gives certain income tax defendants a right to be tried in their district of residence. Although that provision is not at issue here, it indicates that Congress has recognized the hardship imposed by trials away from the defendant's residence. Here, Martino's trial likely will last several weeks. Martino and her husband will have to bear the cost of housing and food, and must suspend their Florida-based business activities during the length of the trial. Martino is also under medical supervision in Florida, and her psychiatrist, Dr. Janet Scholle, has submitted an affidavit stating that a trial near Martino's home is preferable in view of Martino's anxiety disorder.
The Senate Judiciary Committee stated, in connection with § 3237(b), that:
The committee is of the opinion that too frequently prosecutions are not brought in the defendants' home districts but rather in the district most convenient to the director of internal revenue. Often that district may be a considerable distance from the defendant's home. The cost and inconvenience to a defendant may be substantial, especially in the case of an extended trial. The additional expense to the defendant of living away from home, the problem of getting his local attorneys to leave their offices and practices for several days or weeks and the increased cost incurred thereby, the inconvenience to witnesses, these are all factors which the committee believes place a heavy burden upon the defendant which can be better borne by the Government.
Sen. Rep. No. 85-1952, at 3-4 (1958), reprinted in 1958 U.S.C.C.A.N. 3261.
The second factor, the location of witnesses, also favors Martino. It is undisputed that almost all of Martino's potential witnesses, including character witnesses, reside and work in Florida. As courts have recognized, the impact of character witnesses is generally greater in the district where such witnesses live and work. See Ohran, 2000 WL 620217 at *3; see also Aranoff, 463 F. Supp. at 458 (location of character witnesses is "significant"). Although the government suggests that it will call various New York witnesses, it is likewise undisputed that a number of the government's potential witnesses reside in Florida. For example, the government concedes that it may call representatives from three Florida small businesses to testify with respect to the alleged fraudulent business deductions. The presidents of these companies have submitted affidavits stating that their businesses would face a significant hardship if they were required to travel to New York for trial. Finally, Martino's tax preparer Roy Northrup, one of the government's most significant witnesses, has indicated that he would "be willing and able to travel to Florida for Ms. Martino's trial," although he resides and works in the New York-New Jersey area. Northrup Aff. at ¶ 6.
The government indicates that its IRS witnesses and other experts are based in New York. The government also notes that four of the twelve issuer companies which paid fees to Martino in connection with sales of their securities had their principal place of business in New York, although only two of these companies continue to exist. The government represents that some former company officials still reside in this area, although Martino disputes this point. The government does not indicate if it will call representatives from the other issuers, or where such representatives are located.
The third factor — the location of the events in issue — generally carries considerable weight. See United States v. Atler, 81 F.R.D. 524, 526 (S.D.N.Y. 1979) (transferring case where the "nerve center" of the criminal activity was located outside this district). Although the government has put forth sufficient contacts with this district so as to avoid dismissal for lack of venue, venue also would be appropriate in the Southern District of Florida, and indeed Martino engaged in most of the conduct at issue there. The government does not dispute defendant's contention that all of the securities deals which generated the alleged unreported income were solicited, negotiated and executed from Florida. Martino utilized banks in Florida; allegedly deposited part of her unreported income into a trust account at a Florida law firm; and performed the renovation work that is the basis of the alleged fraudulent deductions at her Florida home. Finally, Martino professes that she gathered at her Palm Beach home all of the information necessary to prepare her personal returns and CMA Noel's returns, sent the material on to her accountants from that residence, and indeed signed the returns there. See Affidavit of Carol C. Martino dated July 8, 2000 ("Martino Aff. I"), at ¶ 7. This factor, then, strongly supports Martino's application for transfer.
The remaining factors generally favor Martino as well. For example, Martino's business will be disrupted by a trial in New York. Although the Court notes that some disruption of the defendant's business is an inevitable result of any criminal proceeding, the anticipated length of the trial makes this factor more compelling. In addition, an one-month trial in New York would impose a substantial financial burden on Martino, who must pay for lodging and transportation expenses on her own behalf, as well as on behalf of her Florida-based witnesses. Although the government will incur additional expenses arising from the transfer, the government is in a better position to bear such an expense. See Ohran, 2000 WL 620217 at *4 Finally, the court notes that the location of counsel does not overwhelmingly favor either party. At this point, attorneys for both the government and the defendant practice in New York; however, Florida counsel Jon Sale represented Martino during the three-year investigation of this case, and relinquished his representation when it became apparent that the case would be brought in New York. Sale Aff. at ¶ 3.
Martino negotiates the sale of securities pursuant to Regulation S. Martino suggests that potential stock volatility may necessitate immediate renegotiations and immediate meetings with her clients. Martino also argues that the necessary wire transfers can only be accomplished through her verified phone numbers in Florida. See Martino Aff. II at ¶ 7.
Weighing all these considerations, the Court believes that transfer would best serve the interest of justice in this case. Therefore, Martino's motion to transfer venue is granted.
IV. DISCOVERY ISSUES
Martino also requests that the government turn over certain discovery materials six weeks prior to trial. The decision to compel pre-trial discovery is vested in the discretion of the trial judge. See, e.g., United States v. Cannone, 528 F.2d 296, 299 (2d Cir. 1976). The transferee judge, who will oversee the trial of this matter, is best suited to rule on this portion of defendant's motion. However, in order to avoid unnecessary delay, this Court will grant Martino's application to take the deposition of a foreign witness pursuant to Fed.R.Crim.P. 15(a).
Martino seeks to depose Ms. Ute Resman, a German resident, who was the secretary and bookkeeper for Signature Equities during the period at issue here, and who has first-hand knowledge of Martino's financial relationship with that firm. Ms. Resman is beyond the Court's subpoena power and is not likely to appear voluntarily. Furthermore, the government does not oppose the request. Thus, the Court finds that the circumstances justify permitting the deposition to go forward. See Korolkov, 870 F. Supp. at 65 ("It is well-settled that the `exceptional circumstances' required to justify the deposition of a prospective witness are present if that witness' testimony is material to the case and if the witness is unavailable to appear at trial.") (citations omitted).
The Court also will issue a letter rogatory to the judicial authorities of Luxembourg on the government's behalf, requesting that certain bank records and other materials be produced. Martino does not oppose the application, provided that she is allowed to attach her own letter, which disputes the facts as stated by the government. The government has agreed to incorporate defendant's objection in a revised letter rogatory to be submitted to the Court.
CONCLUSION
For the foregoing reasons, Martino's motions to dismiss the indictment for lack of venue and for duplicity are denied. Martino's motion to take a videotaped deposition and the government's motion for a letter rogatory are granted. Finally, in the interest of justice, the case is transferred in its entirety to the Southern District of Florida.