Opinion
21-CR-193 (KAM)
2023-06-22
UNITED STATES of America, v. Richard Dale STERRITT, Jr. et al., Defendants.
David C. Pitluck, Government Attorney, Michael Robotti, Claire S. Kedeshian, Sarah Evans, United States Attorneys Office, Brooklyn, NY, John O'Donnell Enright, Nicholas Michael Axelrod, DOJ-USAO, Brooklyn, NY, David Norwich Gopstein, Kaplan Hecker & Fink LLP, New York, NY, for United States of America. Dawn M. Cardi, Cardi & Edgar LLP, New York, NY, Diane Ferrone, Stephanie Carvlin, New York, NY, Jacob B. Mitchell, The Law Office of Jacob Barclay Mitchell, New York, NY, for Defendant Richard Dale Sterritt, Jr. Todd A. Spodek, Spodek Law Group P.C., New York, NY, for Defendant Michael Greer. Douglas G. Morris, James Darrow, Public Defenders, Leticia Maria Olivera, Federal Defenders of New York, Inc., Brooklyn, NY, for Defendant Robert Magness. Harlan J. Protass, Protass Law PLLC, New York, NY, for Defendant Mark Ross. John F. Kaley, Doar Rieck & Mack, New York, NY, Jin Ping Lee, The Law Office of Jin P. Lee, New York, NY, for Defendant Robyn Straza. Chad D. Seigel, Tacopina Seigel & DeOreo, New York, NY, Joseph Tacopina, Law Offices of Joseph Tacopina, P.C., New York, NY, for Defendant James Christopher Pittman.
David C. Pitluck, Government Attorney, Michael Robotti, Claire S. Kedeshian, Sarah Evans, United States Attorneys Office, Brooklyn, NY, John O'Donnell Enright, Nicholas Michael Axelrod, DOJ-USAO, Brooklyn, NY, David Norwich Gopstein, Kaplan Hecker & Fink LLP, New York, NY, for United States of America. Dawn M. Cardi, Cardi & Edgar LLP, New York, NY, Diane Ferrone, Stephanie Carvlin, New York, NY, Jacob B. Mitchell, The Law Office of Jacob Barclay Mitchell, New York, NY, for Defendant Richard Dale Sterritt, Jr. Todd A. Spodek, Spodek Law Group P.C., New York, NY, for Defendant Michael Greer. Douglas G. Morris, James Darrow, Public Defenders, Leticia Maria Olivera, Federal Defenders of New York, Inc., Brooklyn, NY, for Defendant Robert Magness. Harlan J. Protass, Protass Law PLLC, New York, NY, for Defendant Mark Ross. John F. Kaley, Doar Rieck & Mack, New York, NY, Jin Ping Lee, The Law Office of Jin P. Lee, New York, NY, for Defendant Robyn Straza. Chad D. Seigel, Tacopina Seigel & DeOreo, New York, NY, Joseph Tacopina, Law Offices of Joseph Tacopina, P.C., New York, NY, for Defendant James Christopher Pittman. MEMORANDUM AND ORDER MATSUMOTO, United States District Judge:
On April 8, 2021, a grand jury returned a five-count superseding indictment (the "Superseding Indictment") (ECF No. 177) charging five defendants with perpetrating interrelated schemes to defraud securities investors and launder the criminally derived proceeds. Pending before this Court are pre-trial motions by defendants Richard Dale Sterritt, Jr. and Robyn Straza (the "Moving Defendants") for bills of particulars, pursuant to Fed. R. Crim. P. 7(f) and for disclosure of both Brady and Giglio material as well as discovery material pursuant to 18 U.S.C. § 3500. (ECF Nos. 142 & 143.) Sterritt also moved for suppression of his post-arrest statements, (ECF No. 159,) for disclosure of post-arrest statements made by the defendants. (ECF No. 143.) Straza has moved for severance pursuant to Fed. R. Crim. P. 14. (ECF No. 143.) The government opposes the Moving Defendants' motions. (ECF Nos. 158 and 167.)
The government has moved to admit evidence of two schemes as background evidence to the charged conspiracies and as other acts evidence pursuant to Federal Rule of Evidence ("FRE") 404(b) ("Rule 404(b)") to prove defendants' intent, preparation, plan, knowledge, and absence of mistake. (ECF No. 145.) Defendants Straza and Sterritt oppose the government's motions. (ECF Nos. 156 and 157.)
Based on the court's review of the parties' motions, the case record, and the applicable law, for the reasons set forth below, the Moving Defendants' pre-trial motions for bills of particulars, pursuant to Fed. R. Crim. P. 7(f), Straza's motion for severance, pursuant to Fed. R. Crim. P. 14, and Sterritt's motion to suppress his post-arrest statements are denied. The government's motion is granted. All other motions involving Sterritt and Straza are moot.
Background
A. Factual Background
The Superseding Indictment charges that in or about and between March 2018 and January 2021, Sterritt and others agreed to engage in two fraudulent schemes: a fraudulent offering of the securities of Zona Energy Inc. ("Zona Energy") by, inter alia, concealing Sterritt's identity and control of Zona Energy and his past criminal conviction for securities fraud conspiracy and by manipulating the price and trading volume of publicly traded shares of Zona Energy and OrgHarvest Inc. ("ORGH"). Zona Energy was a Texas company that defendants represented was engaged in the "acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves" in Texas. (ECF No. 177 at ¶ 1.) ORGH is a Delaware company with a principal place of business in Texas, that purported to produce cannabis products. (ECF No. 177 at ¶ 7.) Both companies are alleged to have been controlled by Sterritt. (ECF No. 177 at ¶¶ 1, 7.) Sterritt, Straza and others are further alleged to have laundered the proceeds of the fraudulent schemes, including by transferring investor funds through a series of brokerage and bank accounts in Straza's name or over which she had control, and then misappropriating the proceeds for the personal use of the conspirators and to purchase shares in ORGH and ERF Wireless Inc. ("ERFB"), which Sterritt conspired to manipulate.
Zona Energy Offering Fraud
According to the detailed facts in the Superseding Indictment, in or about and between March 2018 and January 2021, Sterritt and others conspired to raise $16 million from over 300 victim-investors through the sale of shares of Zona Energy and another company under Sterritt's control, ERFB. (ECF No. 177 at ¶¶ 23, 38.) This conspiracy is referred to throughout the Superseding Indictment and the parties' motions as the "Zona Energy Offering Fraud." Id. Sterritt and others are alleged to have deceived investors through the use of marketing materials that misrepresented several facts about the Zona Energy Offering Fraud, including, but not limited to the allegations (1) that investors were purchasing shares directly from Zona Energy, when in fact the shares provided to investors were issued by other entities controlled by Sterritt; (2) that investor proceeds would be used for business purposes, when in fact they were used for the defendants' luxury item purchases and other personal expenses; (3) facts related to Zona Energy's company financials; and (4) Sterritt's identity and criminal history. (ECF No. 177 at ¶ 31.) The Superseding Indictment also alleges several omissions of material facts from the marketing materials, including, but not limited to the fact that unbeknownst to investors, promoters employed by Sterritt and others to advertise the offering received compensation in the form of discounted shares and/or consulting agreements; and that Zona Energy was controlled by Sterritt, who used the alias "Richard Richman" to conceal his criminal history. Sterritt's undisclosed criminal history would have been of particular and material interest to victim-investors because he had been convicted of conspiracy to commit securities fraud and file false tax returns once before. (ECF No. 177 at ¶ 31.) To facilitate the misappropriation of investor funds, Sterritt, Straza and others are alleged to have laundered millions of dollars from the fraudulent sale of Zona Energy shares, including through the use of bank and brokerage accounts maintained by Straza, for the purpose of investing in other companies controlled by the defendants and enrichening the defendants personally. (ECF No. 177 at ¶¶ 41 - 44.)
ORGH Market Manipulation Scheme
The Superseding Indictment also charges Sterritt and others with perpetrating a closely related market manipulation scheme in or about and between February and June 2020 wherein Sterritt and others engaged in matched trading to artificially inflate the price of ORGH shares. (ECF No. 177 at ¶ 57.) The matched trades were coordinated by Sterritt and others with an undercover agent, who they believed to be a corrupt stock promoter who had a team of corrupt brokers that could buy the artificially inflated ORGH shares in customer accounts (the "ORGH Market Manipulation Scheme"). Id. Sterritt and others allegedly publicized a long-term plan to take Zona Energy public by executing a reverse merger with one of three companies, including ORGH, in which Sterritt failed to disclose his controlling stake. (ECF No. 177 at ¶ 59.) Sterritt and others are alleged to have arranged for friends, family, and close associates to exchange Zona Energy shares for a majority of ORGH's shares. (ECF No. 177 at ¶ 60.)
Matched trades are defined as "the simultaneous purchase and sale of securities by parties that coordinated with each other as to the price and size of the trades" for the purpose of creating "the false appearance that the stock price and/or trading volume increased as a result of genuine market demand for the securities." (ECF No. 177 at ¶ 21.)
Beginning in February 2020, Sterritt and others allegedly worked with the undercover agent who they believed to be a corrupt stock promoter to execute a plan whereby Sterritt would direct the sale of ORGH shares within his control at inflated prices to create the appearance of active trading and the appearance of a legitimate increase in ORGH's share price. (ECF No. 177 at ¶¶ 63 - 74.) The Superseding Indictment charges Sterritt and others with agreeing to pay and in fact paying kickbacks to the undercover agent for his services. (ECF No. 177 at ¶¶ 78 - 80.) Sterritt informed the undercover agent that he controlled "one hundred percent" of the ORGH shares. (ECF No. 177 at ¶ 65). Once the matched trades were executed, Sterritt and others reportedly used their ill-gotten gains for personal expenses, including a luxury car, plastic surgery, investments in unrelated businesses, and other personal expenditures. (ECF No. 177 at ¶¶ 41 - 42.)
After the SEC halted trading in ORGH stock on June 7, 2020, Sterritt and others are alleged to have conspired to engage in yet another market manipulation scheme, that similarly would have involved matched trading, as well as an anticipated reverse-stock split, this time for ERFB, which was yet another Sterritt entity. (ECF No. 177 at ¶¶ 81 - 89.) The reverse stock split was ultimately rejected by FINRA and the SEC halted trading of ERFB shares before Sterritt could execute his alleged plan. (ECF No. 177 at ¶ 89.)
B. Procedural Background
On April 8, 2021, a grand jury returned the Superseding Indictment charging five counts. (ECF No. 177.) As of the date of this Order, charges are pending against three remaining defendants: (1) Sterritt; (2) Straza; and (3) James Christopher Pittman. (ECF No. 177.) Mr. Pittman was granted leave to file motions by July 10, 2023. (Apr. 24, 2023, Minute Entry). The Moving Defendants, Straza and Sterritt, are both charged with conspiracy to commit money laundering. Sterritt is also charged with one count of conspiracy to commit securities fraud in connection with Zona Energy and ORGH, one count of securities fraud in connection with the Zona Energy Offering Fraud, one count of securities fraud in connection to the ORGH Market Manipulation Scheme, and one count of conspiracy to commit wire fraud. Pittman is charged with one count of wire fraud, one count of conspiracy to commit securities fraud in connection to Zona Energy and ORGH, and one count of securities fraud in connection to the Zona Energy Offering Fraud. (ECF No. 177 at ¶¶ 90 - 100.)
On September 12, 2022, Straza moved to sever her trial from Sterritt. (ECF No. 142.) On the same day, Straza and Sterritt moved for an order directing the government to produce bills of particulars and to disclose material pursuant to both Brady and its progeny, Giglio, and 18 U.S.C. § 3500. (ECF Nos. 142, 143.) Sterritt also moved for an order directing the government to produce post-arrest statements by the defendants. (ECF No. 143.) Also on September 12, 2022, the government moved to admit evidence, as background to the charged offenses, or pursuant to Rule 404(b). (ECF No. 145.) On October 26, 2022, Sterritt moved for suppression of his post-arrest statements. (ECF No. 159.)
I. The Moving Defendants' Motion for Bills of Particulars
LEGAL STANDARD
A defendant may seek a bill of particulars, pursuant to Federal Rule of Criminal procedure 7(f), "in order to identify with sufficient particularity the nature of the charge[s] pending against [them], thereby enabling [a] defendant to prepare for trial, to prevent surprise, and to interpose a plea of double jeopardy should [they] be prosecuted a second time for the same offense." United States v. Bortnovsky, 820 F.2d 572, 574 (2d Cir. 1987) (internal citations omitted). The decision whether a bill of particulars should be granted rests within the "sound discretion of the district court." United States v. Panza, 750 F.2d 1141, 1148 (2d Cir. 1984). If the information in the indictment adequately informs a defendant of the charges against them and enables them to prepare their defense, no bill of particulars is required. See United States v. Walsh, 194 F.3d 37, 47 (2d Cir. 1999) ("[a] bill of particulars is required only where the charges of the indictment are so general that they do not advise the defendant of the specific acts of which he is accused") (internal citations omitted).
Courts have previously cautioned that a "bill of particulars is not to be viewed as a discovery device to seek and compel disclosure of the Government's evidence prior to trial." United States v. Barret, 824 F. Supp. 2d 419, 438 (E.D.N.Y. 2011) (citing United States v. Feola, 651 F. Supp. 1068, 1123 (S.D.N.Y. 1987), aff'd without opp., 875 F.2d 857 (2d Cir. 1989)). A bill of particulars should not be treated "as a general investigative tool for the defense, or as a device to compel disclosure of the Government's evidence or its legal theory prior to trial." Feola, 651 F. Supp. 1068, 1123 (S.D.N.Y. 1987), aff'd without opp., 875 F.2d 857 (2d Cir. 1989). The relevant inquiry then is not whether a bill of particulars "would be helpful to the defense," but rather "whether it is necessary." United States v. Batista, No. 06-CR-265, 2009 WL 910357, at *9 (E.D.N.Y. Mar. 31, 2009). Sterritt and Straza, "bear[ ] the burden of showing the information sought is necessary and that [they] will be prejudiced without it." United States v. Shkreli, No. 15-CR-637, 2016 WL 8711065, *4 (E.D.N.Y. Dec. 16, 2016) (citing United States v. Fruchter, 104 F. Supp. 2d 289, 312 (S.D.N.Y. 2000)).
DISCUSSION
Straza, who is charged in Count Five, with a single count of conspiracy to commit money laundering, requests information regarding "the specific transactions underlying the money laundering offense . . . [including] the dates, the amounts of money, the bank names and the account numbers for the accounts[.]" (ECF No. 142-2 at pp. 10 - 11.) Sterritt, who is charged with each of the five counts in the Superseding Indictment, requests information regarding the specific acts ascribed to him, including dates and locations of those acts. Sterritt requests information regarding "when, to whom, or how [he] provided the investor materials, or when, to whom, or how [he] made any representations to investors," in connection to the Zona Energy Offering Fraud. (ECF No. 143 at pp. 5 - 6.) Sterritt claims that subsequent discovery has not sufficiently provided him with the requested information because the government's productions have had the effect of improperly burying him in "a mountain of documents." (ECF No. 143 at p. 6 (citing United States v. Bortnovsky, 820 F.2d 572, 575 (2d Cir. 1987)).) The Moving Defendants both seek disclosure of the names of all indicted and unindicted co-conspirators. (ECF No. 143 at p. 6; ECF No. 142-2 at p. 11.) In opposition to the motion for a bill of particulars, the government asserts that the Moving Defendants' request for bills of particulars is either moot, premature or unsupported by governing law. (ECF No. 158 at p. 9.) For the reasons outlined below, the Court agrees.
Sterritt's request for information regarding "when, to whom, or how Mr. Sterritt made any representations to investors" is exactly the type of "wheres, whens, and with whoms" information that Courts have repeatedly rejected as "beyond the scope of a bill of particulars." United States v. Barret, 824 F. Supp. 2d 419, 439 (E.D.N.Y. 2011) (citing United States v. Mitlof, 165 F. Supp. 2d 558, 569 (S.D.N.Y. 2001)). The government is not required to reveal "the manner in which it will attempt to prove the charges, the precise manner in which [either Sterritt or Straza] committed the crime[s] charged, or to give a preview of its evidence and legal theories." United States v. Batista, No. 6-CR-265, 2009 WL 910357, at *9 (E.D.N.Y. Mar. 31, 2009). Particularly where, as in the case of the Zona Energy Offering Fraud, a defendant is alleged to have participated in a conspiracy, "the defendant is not entitled to the details of the government's conspiracy allegations in a bill of particulars . . . because the government is not required to prove exactly when or how a conspiracy was formed or when a particular defendant joined the scheme." United States v. Carpenter, No. 18-CR-362, 2018 WL 6933160, at *7 (E.D.N.Y. Dec. 28, 2018). "As a result, such requests are consistently denied." United States v. Carpenter, No. 18-CR-362, 2018 WL 6933160, at *7 (E.D.N.Y. Dec. 28, 2018).
Sterritt is not entitled to information, beyond the detailed Indictment and extensive discovery produced by the government, describing "the specific role [he is alleged to have] played [ ] in the conspiracy or the particular acts [he] is alleged to have participated in, had knowledge of, or for which he is being held responsible." United States v. Carpenter, No. 18-CR-362, 2018 WL 6933160, at *7 (E.D.N.Y. Dec. 28, 2018). Sterritt argues that the "mountain of evidence" provided by the government does not fulfill notice obligations without further guidance as to which documents are relevant. (ECF No. 143 at p. 4.) While voluminous discovery cannot cure the defects of an indictment that "alone is [ ] insufficient to satisfy the Government's obligation[,]" a bill of particulars is "required only where the charges of the indictment are so general that they do not advise the defendant of the specific acts of which he is accused." United States v. Ikoli, No. 16-CR-148, 2017 WL 396681, at *5 (S.D.N.Y. Jan. 26, 2017) (finding that a five-page indictment charging nine defendants in conjunction with "mountains of documents" was insufficient to put defendants on notice of the nature of the charges against them); see also United States v. Savin, No. 00-CR-45, 2001 WL 243533, at *4 (S.D.N.Y. Mar. 7, 2001) (finding that because the "indictment [did] not provide detailed notice of the conspiracy allegations and the means and methods of the conspiracy[,]" the voluminous discovery that ensued left the defendant to "guess which of the numerous transactions . . . [were] alleged by the government to be improper.") Here however, the detailed factual allegations in the Superseding Indictment provide sufficient notice of the charges against Sterritt and Straza, and the discovery produced by the government, though voluminous, supplements an already sufficient Superseding Indictment. See United States v. Bortnovsky, 820 F.2d 572, 574 (2d Cir. 1987) ("[g]enerally, if the information sought by defendant is provided in the indictment or in some acceptable alternate form, no bill of particulars is required.") See United States v. Matlock, 675 F.2d 981, 986 (8th Cir. 1982) (holding that the "indictment apprised the defendant of" the charges).
The government has provided a 35-page speaking Indictment, a 38-page speaking Superseding Indictment, and extensive discovery which Sterritt acknowledges exceeds "four terabytes." (ECF No. 143 at p. 6.) These materials fully apprise both Sterritt and Straza of the nature of the charges against them, including much of the information Sterritt requests in his brief, and further amplification through a bill of particulars is not necessary to their defense. (ECF No. 143 at pp. 4 - 6.) Sterritt's contention that "the absence of specifics concerning [his] alleged participation in the conduct charged in the indictment" has left him to speculate what "specific conduct [ ] he is charged with and his alleged role in the fraud," and his claim that there are "no particulars as to [his] alleged conduct in furtherance of the alleged crimes" are belied by the record. (ECF No. 143 at p. 5.) Most of the "particulars" that Sterritt requests can be found in the Superseding Indictment, including: (1) "when, to whom, or how Mr. Sterritt provided the investor materials[;]" (2) "when to whom or how Mr. Sterritt made any representations to investors[;]" and (3) "particulars as to [Sterritt's] alleged conduct in furtherance of the alleged crimes" in connection with the Zona Energy Offering Fraud and the ORGH Market Manipulation Scheme. (ECF No. 143 at p. 5.) The Superseding Indictment alleges, inter alia, that "[b]eginning in or about April 2018 . . . [Sterritt] directed [ ] promoters to send the Zona Offering Summary to prospective investors . . . [and] to provide the investors with the Zona Presentation." (ECF No. 177 at ¶ 29). In exchange for the promoters' agreement to follow Sterritt's direction, the Superseding Indictment alleges that "[Sterritt and Pittman] and at least one of the Promoters agreed that the Promoter would be compensated" and "us[ed] code words[,]" such as "total catch . . . in fishes" to describe the agreement. (ECF No. 177 at ¶¶ 29 - 30.)
Sterritt claims he is entitled to "details of misrepresentations or fraudulent acts," but the case he cites, United States v. Lino, No. 00-CR-362, 2001 WL 8356, at *7 (S.D.N.Y. Jan. 2, 2001), is unavailing. There, the defendant requested disclosure of details Sterritt already has in his possession, including "the identity of each of the [ ] companies over which the [defendant] obtained . . . control of large blocks of . . . securities." Lino, 2001 WL 8356, at *8.
As for as misrepresentations made to investors, the government alleges that Sterritt "directed Co-Conspirator 1 to sign important documents as an officer and on behalf of the entities under Sterritt's control that were selling the [Zona Energy] shares" even though investors received "Zona Offering Materials" advising them that they were buying shares directly from Zona Energy. (ECF No. 177 at ¶ 34.) Sterritt is also alleged to have "held himself out as 'Richard Richman' and did not disclose his true identity or criminal background to investors in Zona Energy or ORGH." (ECF No. 177 at ¶ 10.) He is alleged to have "used new investor funds" to make payments to an older investor who was upset "after learning of [Sterritt's] prior criminal history and real name[.]" (ECF No. 177 at ¶ 54.) Lastly, Sterritt's alleged conduct is further illuminated through the government's explanation of his role as "undisclosed control person of multiple entities related to the Fraudulent Schemes[ ], including Zona Energy, ERFB, ORGH, . . . and others." (ECF No. 177 at ¶ 10.) The foregoing disclosures are more than sufficient to advise Sterritt of the charges against him, particularly in light of the government's detailed explanation of the overall means and mechanisms of both the Zona Energy Offering Fraud and the ORGH Market Manipulation Fraud. Where "[t]he indictment, in conjunction with the discovery provided to defendants, adequately informs the defendants of the acts charged[,] further particularization would reveal evidentiary minutiae to which [the defendant] is not entitled." United States v. Lino, No. 00-CR-362, 2001 WL 8356, at *7 (S.D.N.Y. Jan. 2, 2001).
Straza, who is charged with one count of conspiracy to commit money laundering, also requests a bill of particulars. Straza requests "1) the specific transactions underlying the money laundering offense which the Government plans to offer as proof of the money laundering charge, specifically: the dates, the amounts of money, the bank names and the account numbers for the accounts into which money was allegedly transferred into and/or out of; 2) the identities of known co-conspirators; and 3) the names of non-testifying co-conspirators whose statements the Government intends to offer into evidence at trial against Ms. Straza." (ECF No. 142-2 at 10.) In addition to the discovery produced by the government, this Court has issued a Scheduling Order, (ECF No. 224,) that addresses Straza's request for any material that the government intends to offer as evidence at trial, including as it relates to co-conspirator statements and the transactions underlying Count Five, which charges Straza with engaging in a conspiracy to commit money laundering. Straza's requests are rendered moot by the existing Scheduling Order and this Decision need not address them.
The Moving Defendants jointly request the identities of "all indicted and unindicted co-conspirators known to the government." (ECF no. 143 at p. 6.) See also (ECF No. 142-2 at p. 11,) (requesting "known 'co-conspirators' and 'others' referenced in the Indictment.) Like other defense requests for particularized information, including whether the government should be ordered to disclose the identities of co-conspirators, the court considers "whether the names of unindicted coconspirators are necessary to prepare a defense and avoid surprise." United States v. Solomonyan, 452 F. Supp. 2d 334, 349 (S.D.N.Y. 2006). In assessing this question, Courts look to the following six factors:
"(1) the number of co-conspirators; (2) the duration and breadth of the alleged conspiracy; (3) whether the Government otherwise has provided adequate notice of the particulars; (4) the volume of pre-trial disclosure; (5) the potential danger
to co-conspirators and the nature of the alleged criminal conduct; and (6) the potential harm to the Government's investigation." United States v. Nachamie, 91 F. Supp. 2d 565, 572 (S.D.N.Y. 2000).
First, there are three remaining defendants in this case and the acts of the defendants and each of the nine entities included in the Speaking Indictment are described at length, all but one entity are named and identified and alleged to have been under the control of Sterritt. (ECF No. 177 at ¶¶ 1 - 12.) The government has also represented that it has already provided Sterritt and Straza with the names of the pseudonymous co-conspirators referred to in the Superseding Indictment. (ECF No. 158 at p. 22.)
Second, the Superseding Indictment describes two, closely related fraudulent schemes, both of which took place over the course of three years. Courts in this district have denied requests for co-conspirator names and identities in cases where conspiracies with longer durations, more defendants, and a more expansive temporal period were alleged. See United States v. Shkreli, No. 15-CR-637, 2016 WL 8711065, at *5 (E.D.N.Y. Dec. 16, 2016) (denying a defendant's request for a bill of particulars, including the identities of co-conspirators, where "the number of potential co-conspirators [was] limited" and "each of the four charged schemes involved the same limited group of people . . . and spanned less than five years").
As to the third and fourth factors, as discussed above, the government has provided adequate notice of the particulars within the detailed, speaking Superseding Indictment. The government has further supplemented the Superseding Indictment with substantial discovery, including at least 18 productions and as noted by Sterritt, "four terabytes" of data. (ECF No. 143 at p. 6.) Like the voluminous discovery material in Shkreli, Sterritt and Straza have been provided with text-searchable documents that can be made more digestible through the use of a document review platform, as well as audiovisual material. At the time of the instant motions, the Moving Defendants had more than one year before trial to digest this data and prepare for trial.
With respect to the fifth and sixth factors, the government has articulated a concern that co-conspirators may be discouraged to provide witness testimony out of fear for their safety. (ECF No. 158 at 23.) In support of its stated concern, the government alleges that Sterritt has attempted to communicate with his co-defendants, but does not provide any further factual basis or even describe the alleged attempts in any further detail. Contrary to the government's suggestion, this case is distinguishable from Shkreli, where the government convincingly pointed to Shkreli's "own statements in support of its contention that Mr. Shkreli ha[d] a history of witness intimidation and tampering." United States v. Shkreli, No. 16-CR-637, 2016 WL 8711065, at *6 (E.D.N.Y. Dec. 16, 2016). Accordingly, the last two factors are neutral and weigh neither for nor against disclosure.
The totality of the circumstances in light of the six factors outlined in Nachamie weigh against disclosure. Ultimately, the Moving Defendants have not shown that the identities of the co-conspirators "are necessary to prepare a defense and avoid surprise," and this Court denies their request for the identities of co-conspirators beyond those already disclosed. United States v. Messina, No. 11-CR-31, 2012 WL 463973, at *10 (E.D.N.Y. Feb. 13, 2012).
Sterritt's request for the identities of the victims of the Zona Energy Offering Fraud is also denied. The one case cited in support of his request, United States v. Davidoff, 845 F.2d 1151 (2d Cir. 1988), is inapposite. This is not a case where "it is simply unrealistic to think that a defendant preparing to meet charges of extorting funds from one company had a fair opportunity to defend against allegations of extortions against unrelated companies, allegations not made prior to trial." United States v. Davidoff, 845 F.2d 1151, 1154 (2d Cir. 1988). Sterritt is accused of using multiple companies, which are identified in the Superseding Indictment and therefore were known to Sterritt well before trial, for the purpose of perpetrating the alleged Zona Energy Offering Fraud and the ORGH Market Manipulation Scheme. Notwithstanding the fact that the government is not required to share the names of each victim-investor, either to apprise Sterritt of the charges against him or to prove the elements of those charges, Sterritt has access to those victims' identities through the discovery provided by the government, (ECF No. 158 at pp. 24 - 25,) so there can be no claim that the nature of the securities fraud charges against him will be a surprise. Because the Superseding Indictment alleges that Sterritt and others misappropriated nearly all of the funds raised through the Zona Energy Offering Fraud and the government has shared its theory that "every investor, with the exception of co-conspirators, is likely a victim," (ECF No. 158 at 25,) there is no additional guidance that the Court can order the government to provide Sterritt. Sterritt takes issue with the government's claim that he and others misappropriated "$16 million," offering an alternative number in association with the Zona Energy Offering Fraud, but Sterritt's loosely interpreted claim that disclosing the identities of the Zona Energy Offering Fraud victim-investors is necessary for Sterritt to be able to defend himself against the charge of securities fraud is unavailing. (ECF No. 143 at p. 8.) The government has already spelled out enough and, accordingly, the Moving Defendants' motions for bills of particulars are respectfully denied.
II. The Moving Defendants' Motion to Compel Disclosure (1) Pursuant to Brady and its Progeny, Giglio , (2) Pursuant to 18 U.S.C. § 3500 and (3) for Production of Post-Arrest Statements
As of the date of this Decision, the parties have been ordered to produce a list of exhibits and other pre-trial materials, including any material required to be produced at trial pursuant to 18 U.S.C. § 3500, in accordance with this Court's Scheduling Order. (ECF No. 224.) Accordingly, the Moving Defendants' requests for Brady, Giglio, and § 3500 material are moot.
III. Straza's Motion to Sever
LEGAL STANDARD
The government may join multiple defendants in an indictment "if they are alleged to have participated in the same act or transaction, or in the same series of acts or transactions, constituting an offense or offenses." Fed. R. Crim. P. 8(b). "There is a preference in the federal system for joint trials of defendants who are indicted together. This preference is particularly strong where, as here, the defendants are alleged to have participated in a common plan or scheme." United States v. Salameh, 152 F.3d 88, 115 (2d Cir. 1998) (internal citations omitted). Joint trials "promote efficiency and help avoid the problem of inconsistent verdicts." United States v. Brown, 627 F.Supp.3d 206, 233 (E.D.N.Y. 2022). Notwithstanding the preference for joint trials, Fed. R. Crim. P. 14(a) provides that "[i]f the joinder of offenses or defendants in an indictment . . . appears to prejudice a defendant . . . the court may order separate trials." District courts should "grant [ ] severance under Rule 14 only if there is a serious risk that a joint trial would compromise a specific trial right of one of the defendants, or prevent the jury from making a reliable judgment about guilt or innocence," and only where "less drastic measures, such as limiting instructions" are insufficient "to cure any risk of prejudice." Zafiro v. United States, 506 U.S. 534, 539, 113 S.Ct. 933, 122 L.Ed.2d 317 (1993). Rule 14 "leaves determination of the risk, and the tailoring of any necessary remedy, to the sound discretion of the district courts." Zafiro v. United States, 506 U.S. 534, 540, 113 S.Ct. 933, 122 L.Ed.2d 317 (1993).
A defendant seeking severance "must meet the heavy burden of showing that a joint trial would result in substantial prejudice or a miscarriage of justice." United States v. Gallo, 668 F. Supp. 736, 749 (E.D.N.Y. 1987). Courts consider a number of factors "in determining whether the prejudice of a joint trial rises to the level of a miscarriage of justice" including: "the number of defendants and the number of counts; the complexity of the indictment; the estimated length of the trial; disparities in the amount or type of proof offered against the defendants; disparities in the degrees of involvement by defendants in the overall scheme; possible conflict between various defense theories or trial strategies; and, especially, prejudice from evidence admitted only against co-defendants but which is inadmissible or excluded as to a particular defendant." Id.
DISCUSSION
First, the number of defendants and number of counts in this case does not come close to the number of defendants and counts in cases where courts in this district have found severance to be warranted. There are three remaining defendants in this case and only five counts in the Superseding Indictment alleging two interrelated securities fraud schemes that also involve the use of money laundering and wire fraud to perpetrate the schemes. (ECF No. 177.) Straza herself admits "the number of defendants is not great[.]" (ECF No. 142-2 at p. 6.) This is not a case with "fourteen [ ] defendants, and twenty-two separate counts," United States v. Gallo, 668 F.Supp. 736, 750 (E.D.N.Y. 1987), or "13 defendants and 29 counts," United States v. Upton, 856 F. Supp. 727, 736 (E.D.N.Y. 1994), or a "seventy-eight count indictment charg[ing] twenty-four persons," United States v. DiNome, 954 F.2d 839, 842 (2d Cir. 1992), as in the cases cited by Straza.
Second, Straza has made no showing, nor is there any serious risk that the complexity of the indictment in this case is "beyond the jury's competence." United States v. DiNome, 954 F.2d 839, 842 (2d Cir. 1992). The government does not anticipate "a long and complicated trial," that requires "the aid of a computer" in order to enhance the "jury's ability adequately to heed extraordinarily intricate limiting instructions." United States v. Gallo, 668 F. Supp. 736, 752 (E.D.N.Y. 1987). As described above, this case involves allegations of two, closely related securities fraud schemes, one "part of an effort to cover up the" other, and a limited group of people with overlapping roles and an allegedly common purpose of personally enrichening the defendants at the expense of unsuspecting victim-investors. (ECF No. 158 at p. 29.) Straza lists "multiple fraudulent schemes alleged[,]" all of which are in reality the same two schemes discussed throughout the indictment. The "Zona Offering Fraud, The Zona Energy Sublease, the Zona Energy Offering, the ORGH Pump and Dump Scheme, Fraudulent Matched Trading in ORGH Stock, and Fraudulent Kickbacks to Undercover Agents" are simply different descriptors of the same two securities fraud schemes alleged in the Superseding Indictment, (1) the Zona Energy Offering Fraud and (2) the ORGH Market Manipulation Scheme. (ECF No. 142-2 at pp. 6 - 7.)
Third, the government estimates the trial will last three weeks. (ECF No. 158 at p. 39.) That is a far cry from the months-long trials that courts in this district have deemed "mega-trials" warranting severance. See United States v. Casamento, 887 F.2d 1141, 1151 - 52 (2d Cir. 1989) (ruling that "where . . . the prosecution's case will exceed four months, the judge should oblige the prosecutor to present a reasoned basis to support a conclusion that a joint trial of all defendants is more consistent with the fair administration of justice than some manageable division of the case").
With respect to Straza's claims of spillover prejudice, "[e]vidence adduced against one alleged co-conspirator is 'neither spillover nor prejudicial' if it would be admissible at a separate trial against the movant as an act of a co-conspirator in furtherance of a conspiracy due to the nature of conspiratorial illegal activity." United States v. Barret, 824 F. Supp.2d 419, 433 (E.D.N.Y. 2011) (citing United States v. Rosa, 11 F.3d 315, 341 (2d Cir. 1993)). Straza is alleged to have conspired to launder money in service of the two securities schemes that Sterritt is charged with. Evidence used to shed light on the Zona Energy Offering Fraud and the ORGH Market Manipulation Scheme would therefore be directly relevant to showing the criminal source of the funds that Straza is alleged to have laundered. Straza concedes that at least some of the evidence related to the Zona Energy Offering Fraud and ORGH Marketing Manipulation Fraud would be relevant, but contends that any relevance would be outweighed by the risk of prejudice. (ECF No. 161 at pp. 5 - 6.) The risk of prejudice however, can be mitigated by "less dramatic measures, such as limiting instructions," Zafiro v. United States, 506 U.S. 534, 539, 113 S.Ct. 933, 122 L.Ed.2d 317 (1993), including as it relates to "recordings between Mr. Sterritt and the undercover agent." (ECF No. 161 at p. 5.) It is well established that "severance is not necessarily required simply because evidence is admissible against one defendant but not against another," United States v. Carson, 702 F.2d 351, 367 (2d Cir. 1983), precisely because "less dramatic measures, such as limiting instructions, often will suffice to cure any risk of prejudice." Zafiro v. United States, 506 U.S. 534, 539, 113 S.Ct. 933, 122 L.Ed.2d 317 (1993). Straza claims that defendants do not "have confidence that limiting instructions will provide the constitutional safeguards to which Ms. Straza is entitled" and that the jury is "less likely . . . [to] be able to review fairly the evidence or lack of evidence as it pertains to Ms. Straza." (ECF No. 161 at p. 6.) This is not a case where Straza will "sit in court for weeks or months on end without [her] name[ ] so much as being mentioned" or where "much of the relevant evidence would have been introduced and stored in the jury's collective mind for many months[,]" such that "no amount of cautionary instructions could . . . undo [ ] the harm." United States v. Gallo, 668 F. Supp. 736, 750 (E.D.N.Y. 1987).
Straza claims "the length of a joint trial will be substantial and exponential in length compared to a trial of Ms. Straza alone," (ECF No. 142-2 at p. 7), but the government contends that "separate trials against Sterritt and Straza would be almost entirely duplicative." (ECF No. 158 at p. 30.) However implausible Straza's estimate of an "exponential" disparity in trial times between joint and severed trials, the joint trial estimate of three weeks is well within the scope of trials where requests for severance are routinely rejected. See United States v. Nadeem, No. 13-CR-424, 2014 WL 3563407, at *3 (E.D.N.Y. Jul. 18, 2014) ("[t]his is not a case like United States v. DiNome, 954 F.2d 839 (2d Cir. 1992) where 'an infinitesimal fraction of evidence offered during a sixteen-month trial related to those certain defendants"); see also United States v. Barret, 824 F. Supp.2d 419, 434 (E.D.N.Y. 2011) (noting the "concerns in DiNome are absent in the instant trial, which is estimated to last at most three weeks and concerns eight defendants . . . all of whom are alleged to be involved in the same [ ] conspiracy.") Straza also expresses the specific concern that "a jury hearing a litany of alleged fraudulent acts by others, particularly Sterritt, will be unable to make a fair-minded assessment of the evidence as it relates to" Straza and may simply assume guilt. Straza cites the Moving Defendants' "life entanglements," which is presumably a reference to Straza's and Sterritt's prior marriage to one another, as a source of her concern that she will be deemed "guilt[y] by association" or "guilt[y] by confusion." (ECF No. 142-3 at pp. 7 - 8.) Without any support for the notion that a single trial would lead to unfair prejudice, Straza's concern is misplaced and must be rejected. "It is not per se error to join husband and wife as co-defendants in a conspiracy case," United States v. Barret, 824 F. Supp. 2d 419, 436 (E.D.N.Y. 2011) (citing United States v. Moten, 564 F.2d 620, 630 (2d Cir. 1977)), and "limiting instructions [will] often suffice to cure any risk of prejudice." United States v. Brown, 627 F.Supp.3d 206, 234 (E.D.N.Y. 2022).
Lastly, Straza's claim of antagonistic defenses is unpersuasive. A "showing of antagonistic defenses requires the defendant to make a factual demonstration that acceptance of one party's defense would tend to preclude the acquittal of the other." United States v. Brown, 627 F.Supp.3d 206, 240 (E.D.N.Y. 2022) (internal citations omitted). Straza has made no such showing. Straza claims only that "information and facts were withheld from her" and that she acted "without any knowledge of wrongdoing or criminal intent," when performing "certain ministerial functions." (ECF No. 142-2 at pp. 4 - 5.) In describing her anticipated defense, Straza adds that "she will claim [ ] her co-defendants deceived her and misled her into performing certain activities at their direction which she did not believe or understand were either wrongful or criminal" and that she "had no intent to launder the proceeds of any illegal activity." (ECF No. 142-2 at pp. 4 - 5.) She does not allege that this defense would necessarily preclude Sterritt's acquittal. Nor could she. At most, this is a simple case of "mere finger-pointing," which "does not require severance." United States v. Casamento, 887 F.2d 1141, 1141 (2d Cir. 1989). "In order to make a showing of 'mutually antagonistic' or 'irreconcilable defenses,' the defendant must make a factual demonstration that 'acceptance of one party's defense would tend to preclude the acquittal of [the] other." United States v. Salameh, 152 F.3d 88, 116 (2d Cir. 1998) (citing United States v. Keck, 773 F.2d 759, 765 (7th Cir. 1985)). This is simply not the case here. The jury could find that notwithstanding Straza's purported ignorance as to the nature of the transactions charged as money laundering in the Superseding Indictment, neither she nor Sterritt engaged in any fraud at all. And, as with the risk of spillover prejudice discussed above, "[m]utually antagonistic defenses are not prejudicial per se . . . Rule 14 does not require severance even if prejudice is shown; rather, it leaves the tailoring of the relief to be granted, if any, to the district court's sound discretion." Zafiro v. United States, 506 U.S. 534, 538, 113 S.Ct. 933, 122 L.Ed.2d 317 (1993) (citing United States v. Lane, 474 U.S. 438, 449, n. 12, 106 S.Ct. 725, 88 L.Ed.2d 814 (1986)). Straza's motion to sever is accordingly denied.
IV. The Government's Motion in Limine to Admit Evidence as Background to the Charged Offenses or Pursuant to Rule 404(b)
LEGAL STANDARD
The government moves in limine to admit evidence of uncharged or past conduct as direct background evidence of the charged offenses or, in the alternative, pursuant to Federal Rule of Evidence 404(b). Federal Rule of Evidence 404(b) permits the use of "evidence of any other crime, wrong, or act" to prove "motive, opportunity, intent, preparation, plan, knowledge, identity, absence of mistake, or lack of accident," Fed. R. Evid. 404(b), if the "probative value [of the evidence] is not substantially outweighed by the risk of unfair prejudice." United States v. Williams, 205 F.3d 23, 33 (2d Cir. 2000). Where evidence of prior criminal conduct "inform[s] the jury of the background of the conspiracy charged, [ ] complete[s] the story of the crimes charged, and [ ] help[s] explain to the jury how the illegal relationship between the participants in the crime developed[,]" the evidence may be permitted under Rule 404(b). United States v. Pitre, 960 F.2d 1112, 1119 (2d Cir. 1992). Courts within the Second Circuit have "long adopted an 'inclusionary' approach to the admission of uncharged crime evidence, under which evidence of prior crimes, wrongs, or acts 'is admissible for any purpose other than to show a defendant's criminal propensity.' " United States v. Paulino, 445 F.3d 211, 221 (2d Cir. 2006) (internal citations omitted). The district court has "broad discretion to admit evidence pursuant to Rule 404(b)." United States v. Inserra, 34 F.3d 83, 89 (2d Cir. 1994).
When evaluating evidence offered for admission under Rule 404(b), courts consider whether the evidence "(1) [ ] was offered for a proper purpose; (2) [ ] was relevant to a disputed trial issue; (3) [has] probative value [that] is substantially outweighed by [ ] possible prejudice; and (4) [whether] the trial court administered an appropriate limiting instruction." United States v. Edwards, 342 F.3d 168, 176 (2d Cir. 2003) (internal citations omitted). Courts assess the risk of unfair prejudice, under FRE 403, by conducting a "probative - prejudice balancing test," United States v. Carboni, 204 F.3d 39, 44 (2d Cir. 2000)(internal citations omitted), to determine whether the evidence involves conduct "any more sensational or disturbing than the crimes with which [the defendants] are charged." United States v. Pitre, 960 F.2d 1112, 1121 (2d Cir. 1992). Where evidence of prior bad acts does "not involve conduct more inflammatory than the charged crime, and the district court [gives] a careful limiting instruction," admission does not violate the Rule 403 balancing requirement. United States v. Livoti, 196 F.3d 322, 326 (2d Cir. 1999).
DISCUSSION
The government seeks to admit evidence at trial of two schemes, the "Continental Scheme" and the "GRUI Scheme," pursuant to Rule 404(b) as background to the charged conspiracies, the Zona Energy Offering Fraud and the ORGH Market Manipulation Scheme, and specifically for background and for the purpose of showing the Moving Defendants' "intent, preparation, plan, knowledge and absence of mistake" as it relates to the charged conspiracies. (ECF No. 145 at p. 1.)
The first scheme, the Continental Scheme, relates to a securities fraud conspiracy that is the subject of Sterritt's prior criminal conviction and a civil judgment against Sterritt, Straza and others. Sterritt pleaded guilty to holding a controlling interest in Continental Investment Corporation ("Continental"), which was concealed from investors through the use of entities and trusts nominally held in the name of his associates, and soliciting investments in Continental based on false claims about Continental's business prospects and by engaging in inappropriate coordinated trades of Continental shares. (ECF No. 145 at p. 3.) Sterritt was found to have misappropriated investor funds for his personal use by laundering the funds with the assistance of others, including Straza. (ECF No. 145 at p. 3.)
The second scheme, the GRUI Scheme, involves Grupo Resilient International Inc. ("GRUI"), an entity that purportedly offered hurricane relief services, specifically mobile broadband trailers, in the after-math of Hurricane Harvey. (ECF No. 145 at p. 3.) Sterritt allegedly represented himself as a GRUI consultant. (ECF No. 145 at p. 3.) The government alleges that, in fact, Sterritt held a controlling stake in GRUI and worked with others to raise GRUI's share price by issuing inaccurate press releases about GRUI's business operations, contracts, and financials. (ECF No. 145 at p. 4.) The SEC ultimately suspended trading in GRUI shares on September 22, 2017. (ECF No. 145 at p. 4.)
The government alleges that Sterritt, Straza and others engaged in a similar series of events in connection with the Zona Energy Offering Fraud and ORGH Market Manipulation Scheme. (ECF No. 145 at p. 1.) One of the central misrepresentations that the government claims Sterritt engaged in relates to the use of the alias, "Richard Richman," which the government alleges Sterritt used to prevent Zona Energy investors from learning of his past fraud as he sought to engage in the same conduct yet again, (ECF No. 145 at p. 6,) and which the government alleges Sterritt used to dupe investors in connection to the GRUI Scheme as well. (ECF No. 145 at p. 6.) The government also seeks to introduce evidence of the Continental Scheme and the GRUI scheme as background to the charged schemes because the charged schemes involved many of the same participants, including Straza, and the same means and manner of defrauding investors, including the misrepresentation of Sterritt as a consultant to the relevant entities, rather than the person in control; the use of undisclosed entities and trusts nominally held by Sterritt's associates, including Straza, to obfuscate the true ownership of the relevant entities; the use of accounts under Straza's control to funnel proceeds of the schemes; and the diversion of investor funds for personal use by the defendants. (ECF No. 145 at pp. 5 - 6.)
Sterritt claims evidence related to the Continental Scheme would not "shed[ ] light on [his alleged] 'plan' or 'knowledge' and that the government seeks to use evidence related to the Continental Scheme to rebut Sterritt's anticipated defense "that he acted without fraudulent intent," (ECF No. 157 at p. 4,) which, surprisingly, he claims is not at issue. Sterritt further asserts that "[t]he conduct that Mr. Sterritt allegedly engaged in that led to his conviction in the Continental Scheme took place almost 20 years ago, involved a stated business purpose of trying to convert a granite quarry into a landfill and in no way is part of nor background to ORGH or Zona Energy." (ECF No. 157 at p. 8.)
The government's stated purpose of admitting the evidence of the prior schemes however, is to provide context for "a central misrepresentation in the charged" schemes: the alleged misrepresentation of Sterritt's identity in order to obscure his criminal conviction and the civil judgment resulting from the Continental Scheme. (ECF No. 163 at p. 1.) As noted earlier, Sterritt is alleged to have used the "Richard Richman" alias in the Zona Energy Offering Fraud to prevent investors from learning of his conviction in connection to the Continental Scheme precisely because the details of that conviction would have been of particular interest to Zona Energy investors and could have tipped them off to the possibility that they were being defrauded. Sterritt's alleged means and methods, including, but not limited to, misrepresentations to Zona Energy investors regarding his true identity and criminal history caused the Continental Scheme to be "inextricably intertwined" with the Zona Energy Offering Fraud. United States v. Carboni, 204 F.3d 39, 44 (2d Cir. 2000) (reasoning that "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") (quoting United States v. Gonzalez, 110 F.3d 936, 942 (2d Cir. 1997)). The government's additional stated purpose of showing the longstanding relationship between the Moving Defendants and their experience allegedly perpetrating a nearly identical scheme using MANY of the same means and manner is not a rebuttal to a hypothetical defense, as Sterritt claims—it bears directly on the government's allegations of Sterritt's misrepresentations and omissions in the instant case, and the Moving Defendants' means and manner of perpetrating the charged schemes. See United States v. Araujo, 79 F.3d 7, 8 (2d Cir. 1996) (noting that where the government sought to introduce evidence of a prior crime in which the defendants acted together, "[s]teadfast behavior in carrying out another—albeit different-crime would tend to show the basis for [ ] trust" between the two defendants in carrying out the charged offense together as well.)
As to the GRUI Scheme, Sterritt responds that although he is alleged to have used the exact same alias, similarly posed as a consultant when, in fact, he was an undisclosed control person, and sought to artificially inflate the share price of the relevant entities by misrepresenting and omitting material facts in investor materials, the "similarities between uncharged acts and the charged offense[s] [do] not meet the requirement of showing the reasoning that supports the relationship between proffered evidence and the use for which it supposedly is being offered." (ECF No. 157 at p. 4 (internal emphasis omitted).) In order to use evidence of uncharged crimes to show knowledge or intent, the government "must identify a similarity or connection between the two acts that makes the prior act relevant to establishing knowledge of the current act." United States v. Garcia, 291 F.3d 127, 137 (2d Cir. 2002). Here, the government has made such a showing. The government seeks to use evidence of the GRUI Scheme to demonstrate Sterritt's "familiarity with market-manipulation techniques," and to illustrate Sterritt's know how with respect to the types of tactics allegedly deployed to perpetrate the charged conspiracies, including the use of the same alias and the concealment of Sterritt's control over the relevant entities. See United States v. Pitre, 960 F.2d 1112, 1118 (2d Cir. 1992) (upholding admission of evidence related to uncharged crimes to show the working relationship between the parties and their familiarity with the type of transactions in the instant charge).
Both Sterritt and Straza assert the government's thinly veiled intent is to admit evidence of the prior schemes to show propensity, which is impermissible under FRE 404(b)(1) and Sterritt argues that even if evidence of the Continental Scheme and GRUI Scheme had some probative value, the evidence should be excluded under FRE 403 because of the risk that it would "cause unfair prejudice, confuse the issues, mislead the jury and cause undue delay[.]" (ECF No. 157 at p. 9.) In support of his assertion, Sterritt cites the "similarity of the charged offenses to the evidence the government seeks to admit[,]" the "extremely inflammatory" nature of evidence related to the GRUI Scheme, which allegedly involved "the use [of] a natural disaster and its victims to [personally] profit" Sterritt, and the fact that Sterritt "was not convicted of any misconduct with respect to GRUI" as likely to be confused or misinterpreted by the jury for evidence of Sterritt's character and propensity to commit securities fraud. (ECF No. 157 at pp. 9 - 10.)
Sterritt's argument that the connection between the GRUI Scheme and Hurricane Harvey make it "extremely inflammatory" is unpersuasive. Evidence of the GRUI Scheme that focusses on the market manipulation component and not on the purported aims of GRUI's business operations will not be so confusing or inflammatory as to "excite emotions against the defendant" or create a "high possibility of jury misuse." United States v. Curley, 639 F.3d 50, 57 (2d Cir. 2011) (internal citations omitted). As the government notes, "GRUI did not purport to be a charity or attempt to raise money to provide for vulnerable victims," and the government does not seek to introduce evidence of the GRUI Scheme to paint Sterritt as someone that takes advantage of victims of a natural disaster, but rather to show the same market manipulation tactics allegedly at play in the charged schemes. (ECF No. 163 at p. 7.) Moreover, any risk of prejudice in this case will be mitigated by limiting instructions directing the jury to consider evidence of the prior schemes only for the proper purposes, as background evidence of the charged offenses, and under Rule 404(b) and prohibiting any inference related to character or propensity. See Huddleston v. United States, 485 U.S. 681, 691, 108 S.Ct. 1496, 99 L.Ed.2d 771 (1988) (reasoning that "the protection against [ ] unfair prejudice emanates . . . from four [ ] sources," including the protection that "the trial court shall, upon request, instruct the jury that the similar acts evidence is to be considered only for the proper purpose for which it was admitted.") The court will consider the defense's proposed limiting instructions.
The government also asserts that evidence of the Continental Scheme is relevant to Straza's intent, knowledge . . . [and the] absence of mistake, or lack of accident," Fed. R. Evid. 404(b), to "the extent Straza intends to argue that she was not aware of any wrongdoing." (ECF No. 145 at p. 6.) Straza has stated in her submissions that she seeks to argue exactly that. Straza claims she acted "without any knowledge of wrongdoing or criminal intent," when performing "certain ministerial functions," and that "her co-defendants deceived her and misled her into performing certain activities at their direction which she did not believe or understand were either wrongful or criminal." (ECF No. 142-2 at pp. 4 - 5.) Straza claims "[t]here is simply no connection between the current charges and the [Continental Scheme] and [that] the chain of inferences which the Government seeks to have the jury draw is so attenuated by the passage of time as to lack evidentiary value other than to prejudice Ms. Straza." (ECF No. 156 at p. 5.)
The court finds that the connection between the Continental Scheme and the Zona Energy Offering Fraud allegations is quite clear. The government alleges Straza and Sterritt worked together to perpetrate the Continental Scheme in much the same way they worked together to perpetrate the Zona Energy Offering Fraud, by funneling proceeds from investor funds through accounts controlled by Straza and by maintaining shares of the respective entities in the name of both Sterritt and Straza, unbeknownst to investors. (ECF No. 163 at p. 2) ("[t]hat Straza played a nearly identical role in the earlier Continental Scheme explains why Sterritt trusted her with millions of dollars in ill-gotten gains, and why she served as an intermediary for the land ultimately transferred to Zona Energy"). The government also seeks to use evidence of the Continental Scheme to show that because Straza was involved in a nearly identical securities fraud scheme for which she and Sterritt were held civilly liable and in connection to which Sterritt was criminally convicted, she was not mistaken or misled when it came to her involvement in the Zona Energy Offering Fraud.
Like Sterritt, Straza argues evidence of the Continental Scheme will be "unfairly prejudicial since it creates the risk that it will be viewed by the jury as propensity evidence" and that because any probative value is diminished by the passage of several years since the Continental Scheme, this risk of prejudice outweighs any probative value. (ECF No. 156 at p. 7.) Straza asserts correctly that limiting jury instructions do not always suffice to eliminate the risk of unfair prejudice but does not explain why limiting jury instructions would fail sufficiently to diminish the risk of prejudice in this case, other than to reference the "unfair emotional impact" that the "relationship between Ms. Straza and Mr. Sterritt," as former spouses, will purportedly have on the jury. (ECF No. 156 at pp. 10 - 11.) As noted earlier, the Moving Defendants' former marriage is not sufficient reason, on its own, to doubt the ability of the jury to evaluate the evidence as to each defendant based on the crimes alleged against them as individuals.
Finally, the government previewed that if Straza or Sterritt were to testify at trial, the government would seek to introduce evidence of the Continental Scheme and the GRUI Scheme, pursuant to FRE 608 or FRE 609. As noted by Sterritt, "[b]ecause the government has not moved to admit the evidence but merely given notice that it might, the issue is not ripe for this Court's review." (ECF No. 157 at p. 1, n. 1.) Straza's arguments related to the government's previewed intent as to the introduction of evidence pursuant to FRE 608 or FRE 609 therefore need not be addressed at this time.
V. Sterritt's Motion to Suppress
LEGAL STANDARD
The Fifth Amendment of the United States Constitution demands that "[n]o person . . . shall be compelled in any criminal case to be a witness against himself." U.S. Const. amend. V. In the context of a custodial interrogation, a suspect may face "inherently compelling pressures" to make inculpatory statements that they otherwise would not have made but for the "proper safeguards" outlined in Miranda v. Arizona, 384 U.S. 436, 467, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966). Arizona v. Mauro, 481 U.S. 520, 525, 107 S.Ct. 1981, 95 L.Ed.2d 458 (1987). Among those proper safeguards is the right to be free from interrogation in the absence of counsel, once an individual has "expressed [the] desire to deal with the police only through counsel . . . unless the accused himself initiates further communication[.]" Arizona v. Mauro, 481 U.S. 520, 525 - 26, 107 S.Ct. 1931, 95 L.Ed.2d 458 (1987) (citing Edwards v. Arizona, 451 U.S. 477, 484 - 85, 101 S.Ct. 1880, 68 L.Ed.2d 378 (1981)). Interrogation refers to "express questioning or its functional equivalent," which can be "any words or actions on the part of the police . . . that the police should know are reasonably likely to elicit an incriminating response from the suspect." Rhode Island v. Innis, 446 U.S. 291, 292, 100 S.Ct. 1682, 64 L.Ed.2d 297 (1980). This inquiry is focused on "the perceptions of the suspect, rather than the intent of the police." Id.
Whether a statement is self-initiated or the result of impermissible pressures resulting from the "functional equivalent" of questioning by law enforcement depends on multiple factors." In United States v. Colon, 835 F.2d 27, 30 (2d Cir. 1987), the Second Circuit found that because Colon "was not questioned, confronted with evidence, or even encouraged to be honest and tell the facts" and because Colon "initiated the conversation," his statements could not be considered "the product of an interrogation or its functional equivalent." Even where an officer apprises the defendant "of the seriousness of the crime and the potential effect it could have on his employment," if the officer does "not reference the evidence or any specific aspects of the case," any subsequent statements are not the product of an interrogation. United States v. Ardines, 293 F.R.D. 117, 124 - 25 (E.D.N.Y. 2013) (citing Rosa v. McCray, 396 F.3d 210, 220 - 21 (2d Cir. 2005).
Moreover, "a discussion of cooperation is [not] inherently a form of questioning," particularly where "the agents [ ] suggest . . . [a defendant] should discuss [the] possibility [of cooperating] with his attorney" and "merely supplied [the defendant] with general information regarding the crime he was suspected of committing, in response to [the accused's] own questions." United States v. Guido, 704 F.2d 675, 677 (2d Cir. 1983); see also United States v. Annucci, No. 06-CR-982, 2007 WL 1310156, at *5 (S.D.N.Y. May 3, 2007) (noting that where law enforcement officers discuss cooperation with a suspect, and later provide general information about the charges levied against that suspect in response to his own request for information, inculpatory statements made by that individual are not a function of the violation of his Fifth Amendment rights.) Guido, however, "does not foreclose the conclusion that a solicitation to cooperate or assist can be inculpatory." United States v. Familetti, 878 F.3d 53, 59 (2d Cir. 2017)(noting that "asking a suspect to assist or cooperate can sometimes be incriminating, depending on the circumstances" and including the following circumstances as examples: where "there is no concern about officer or public safety; the officers have volunteered the specific criminal behavior at issue; [and where] the officers have given the defendant good reason to believe that he is suspected of . . . criminal conduct").
DISCUSSION
Sterritt was arrested, pursuant to an arrest warrant, at a residence shared with his mother in Texas on the morning of April 14, 2021. (ECF No. 159-2 at ¶¶ 1 - 4.) Upon his arrest, Sterritt was twice advised orally of his rights by FBI Special Agent Aristotelis Kougemitros, pursuant to Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966), and invoked his right to counsel by indicating that he would like to consult with his attorney before discussing the charges brought against him. Sterritt admits that thereafter, Special Agent Kougemitros did not explicitly ask him any questions. (ECF No. 159-2 at ¶¶ 4 - 7.) Subsequently, Sterritt made inculpatory statements to Special Agent Kougemitros, which he now seeks to suppress, based on his assertion that his statements were made in violation of his Fifth Amendment right against self-incrimination.
That Sterritt was in custody at the time of the relevant statements is not in dispute; he was informed that he was under arrest, handcuffed, and in a law enforcement vehicle. (ECF No. 159-1 at p. 5; ECF No. 167 at p. 6, n. 3.) The government and Sterritt dispute whether Sterritt was subject to interrogation following his arrest. Though Sterritt admits he was not explicitly questioned by Special Agent Kougemitros following his arrest, Sterritt alleges that he was subject to the "functional equivalent" of questioning because Special Agent Kougemitros made comments that he should have known were "reasonably likely to elicit an incriminating response." Rhode Island v. Innis, 446 U.S. 291, 301, 100 S.Ct. 1682, 64 L.Ed.2d 297 (1980); (ECF No. 159-1 at p. 6.) In opposition, the government argues that Sterritt's post-arrest statements were entirely self-initiated, spontaneous and unsolicited, and that Special Agent Kougemitros merely made declaratory statements that are not the functional equivalent of questioning. (ECF No. 167 at p. 2.) The evidence before the Court establishes that Sterritt asked about and was advised of the charges, but he was not asked any questions regarding the charges by the agents.
Given the specific circumstances and the context of their discussion, Special Agent Kougemitros did not engage in the functional equivalent of questioning when responding to and speaking with Sterritt after his arrest. In response to Sterritt's question whether the agent had a picture of the indictment, Special Agent Kougemitros replied that he did not, but showed Sterritt the arrest warrant and read a list of the charges against Sterritt, from the arrest warrant. (ECF No. 159-4 at p. 4.) When Sterritt asked if the FBI had picked up "the Chief Strategy Officer," Special Agent Kougemitros responded that he was "not at liberty to talk to [Sterritt] about things at this point," and added "I will tell you that this is not like [the] last time you were picked up. A lot more people got put into this one." (ECF No. 159-4 at p. 4.) After a brief pause, the agent added, "if you have stuff that you want to provide . . ." (ECF No. 159-4 at pp. 4 - 7.) Special Agent Kougemitros did not ask any questions of Sterritt about the charges; instead he raised the possibility of cooperation and agreed that Sterritt should first speak with his attorneys. As the Second Circuit noted in Guido, "[w]e do not accept the proposition that a discussion of cooperation is inherently a form of questioning for purposes of Miranda." 704 F.2d at 677. Here, Special Agent Kougemitros made clear that he would not ask questions and agreed that Sterritt should speak with his attorney. Special Agent Kougemitros responded "okay," when Sterritt offered to "talk to you all with my attorneys," and added, "Like I said I can't tell you what to do and you got to make the . . ." (ECF No. 159-4 at pp. 6 - 7.) Thus, as in Guido, Special Agent Kougemitros indicated that Sterritt would not be questioned about the case at that time, and there is "no indication that the agents' conduct was "designed to elicit an incriminating response." Guido, 704 F.2d at 677 (quoting Rhode Island v. Innis, 446 U.S. 291, 302, 100 S.Ct. 1682, 64 L.Ed.2d 297 (1980)).
After interrupting Special Agent Kougemitros, as he was saying "I can't tell you what to do and you got to make the . . ." Sterritt began to make the statements, which he now seeks to suppress. Sterritt spontaneously offered incriminating statements after being supplied with "general information regarding the crime he was suspected of committing, in response to [the accused's] own questions" and after he was advised that he could cooperate, but was assured that he could first speak with his counsel without any other "indication that the agents' conduct was designed to elicit an incriminating response." United States v. Guido, 704 F.2d 675, 677 (2d Cir. 1983) (internal citations omitted).
As in United States v. Choudhry, 24 F. Supp. 3d 273, 280 (E.D.N.Y. 2014), this a case where "immediately following the Defendant's invocation of his rights, the agents prepared to" end the discussion and the defendant "began to make spontaneous, unprovoked and incriminating statements." Sterritt, responded to the agent's statement that he could not tell Sterritt what to do by spontaneously making the statements he now seeks to suppress. Special Agent Kougemitros could not have known that by responding to Sterritt's questions about the charges, indicating that this prosecution involved more people than Sterritt's earlier case, (ECF No. 159-4 at p. 4,) he was likely to eliciti an incriminating response from Sterritt in violation of Miranda. Miranda v. Arizona, 384 U.S. 436, 476, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966). Accordingly, Sterritt's motion to suppress the two post-arrest statements at 26:40 - 26:52 and at 31:38 - 31:48 is denied.
CONCLUSION
For the foregoing reasons, the Moving Defendants' motions for bills of particulars, Straza's motion for severance, and Sterritt's motion to suppress his post-arrest statements at 26:40 - 26:52 and at 31:38 - 31:48 are DENIED. The government's motion to admit evidence as direct background evidence and pursuant to Rule 404(b) is GRANTED. All other motions are denied as MOOT.