Opinion
02 Cr. 800 (SWK).
June 25, 2003.
OPINION ORDER
Defendants Louis and Herman Silberstein jointly move for dismissal of the indictment pursuant to Rules 12(b)(1) and 12(b)(2) of the Federal Rules of Criminal Procedure and, alternatively, seek a Bill of Particulars pursuant to Rule 7(f), any and all discovery authorized by Rule 16, and all material authorized to be disclosed to the defendants under Brady v. Maryland, 373 U.S. 83, 87 (1963), and Giglio v. United States, 450 U.S. 150, 154 (1972). For the reasons set forth below, defendants' motion is denied in part and granted in part.
I. FACTUAL BACKGROUND
Defendants Louis and Herman Silberstein were principals in a wrapping paper manufacturing company named Wrapwell, Inc., located in New Jersey. In the early 1990s, the Silbersteins entered into a series of loan agreements, guarantees and promissory notes with First New York Bank for Business ("First New York") through which they obtained over $3 million in financing for Wrapwell. By mid-1992, defendants had defaulted on their obligation to repay the funds, causing First New York to accelerate the repayment date of the loans and commence legal proceedings against the defendants. On or about June 24, 1992, defendants entered into an agreement with First New York designed to help Wrapwell continue its operations and endeavor to obtain alternative financing. Through this agreement, defendants "agreed to join with First New York to direct all present and future Wrapwell customers to pay directly to First New York all customer payments owed to Wrapwell as of the date of the First Assignment Agreement and that become due after that date." Aff. of Ronald M. Kleinberg in Supp. of Motion to Dismiss ("Kleinberg Aff."), dated April 3, 2003, at ¶ 19, Ex. B. ¶ 1. The agreement further obligated the defendants to first pay down the outstanding principal and interest due on their loans, and any remaining sums would be deposited in Wrapwell's operating account for use by the business. Id.
Shortly after entering into the June 24, 1992 agreement, First New York alleged that the defendants had breached the agreement and entered into negotiations with defendants to secure payment on the loans and help Wrapwell find alternative financing. A second agreement between First New York and defendants was signed on September 21, 1992. As in the first agreement, the second agreement obligated the defendants to "join with [First New York] in notifying each of its customers and account debtors that all payments due to [Wrapwell] must be directed to [First New York]." Id. at Ex. C. ¶ 1.
In June 1992, defendants established three separate corporate checking accounts at Republic National Bank of New York ("Republic") in the names Wrapwell Corporation, Wrapwell Domino, and K.W. Paper. The Government alleges that defendants systematically used these three accounts to defeat their obligations under the June and September 1992 agreements and conceal their actions from First New York by (1) disregarding the agreement to direct all accounts receivable to First New York and, instead, directing their customers to continue making payments directly to Wrapwell and then depositing those payments into the Wrapwell account at Republic; (2) forming a series of shell companies named Wrapwell Domino, K.W. Paper, and Newark Tubes, and then delivering products to, billing, and collecting payments from Wrapwell customers in the names of these companies; and (3) directing the principal of another corporation to incorporate a subsidiary called Domino Paper Company, and thereafter using that company as a third-party billing and collecting agent for sales of Wrapwell products. The Government further alleges that defendants completed their fraudulent scheme by depositing the payments they obtained from Wrapwell customers into their accounts at Republic, thereby concealing those payments from First New York. Gov't Mem. of Law in Opp. to Motion to Dismiss ("Gov't Opp."), dated April 18, 2003, at 7.
In April 1992, as Wrapwell was unable to make full payment as demanded by First New York, the Bank commenced an action in the Supreme Court of New York County on the notes against Wrapwell and the guarantors of the notes. The Bank went out of business in November 1992 and its operations were subsequently taken over by the F.D.I.C. Thereafter, the F.D.I.C. removed the original civil lawsuit to federal court and secured a judgment against Wrapwell, the defendants and their guarantors. This litigation continued until January 2002, with a motion for summary judgment filed in 1994 that was denied in part and granted in part in 1996, discovery conducted between 1997 and 1999, and a second motion for summary judgment filed in 2000 and granted in January 2002. See Aff. of Andrew C. DeVore, dated April 18, 2003, at 3.
In November 1999, the F.D.I.C. New York Legal Services Office referred the matter to the F.D.I.C. Office of Inspector General, Office of Investigations, for possible criminal investigation.Id. at ¶ 3(k). The Government advises that the referral was made at that time "because the F.D.I.C. New York Legal Services Office realized only gradually, based on the entirety of the data acquired during the civil proceedings and defendants' conduct in connection with those proceedings, that the defendants may have engaged in criminal conduct." Id. In February 2000, the F.D.I.C. Office of Inspector General, Office of Investigations, referred the matter to the United States Attorney's Office for the Southern District of New York. Id. at ¶ 3(m).
On June 20, 2002, a two count indictment was filed in this district alleging the defendants conspired to defraud a financial institution, in violation of 18 U.S.C. § 1344 and 2, and committed bank fraud, in violation of 18 U.S.C. § 1344 and 2.
II. PRE-INDICTMENT DELAY
Defendants argue that the length of time that elapsed from the beginning of their alleged criminal actions until the time of indictment was unduly long and prejudiced their ability to mount an effective defense.
Although the Supreme Court has noted that the "primary guarantee against bringing overly stale criminal charges" is the applicable statute of limitations, United States v. Marion, 404 U.S. 307, 321 (1971), excessive pre-indictment delay may, under certain circumstances, violate a defendant's Fifth Amendment right to due process. United States v. Lovasco, 431 U.S. 783, 789 (1977). In the present matter, the applicable statute of limitations is ten years from the date of commission of an offense under 18 U.S.C. § 3293. The indictment in this case was brought within seven years of the end of the conspiracy, and within three years from the time the matter was referred to the United States Attorney's Office for possible criminal prosecution.
In order to have an indictment dismissed for undue pre-indictment delay, a defendant bears the heavy burden of demonstrating both "actual prejudice to the defendant's right to a fair trial and unjustifiable Government conduct." United States v. Elsbery, 602 F.2d 1054, 1059 (2d Cir. 1979); see also Fiqueroa v. Donnelly, No. 02 Civ. 6259, 2003 WL 21146651, *5 (S.D.N.Y. May 16, 2003) (petitioner failed to demonstrate a violation of due process as a result of the delay between the time of the commission of the crime and the indictment); United States v. Martinez, No. 94 Cr. 219, 1995 WL 10849 (S.D.N.Y. Jan. 12, 1995) (defendant failed to show either actual prejudice from delay or improper motive by Government); United States v. Lovasco, 431 U.S. at 795 (defendant must show not only prejudice, but also that delay was intended by Government to gain a tactical advantage); United States v. Gouveia, 467 U.S. 180, 192 (1984) (claim of pre-indictment delay can only be successful "if defendant can prove that the government's delay in bringing the indictment was a deliberate device to gain an advantage over him and that it caused him actual prejudice in presenting his defense").
A. ACTUAL PREJUDICE
The standard for demonstrating "actual prejudice" is fairly stringent, as "[t]he dimming of memories with the passage of time, without more, does not create actual substantial prejudice to the right of a fair trial which would warrant dismissal of a case for pre-indictment delay." United States v. Harrison, 764 F. Supp. 29, 32 (S.D.N.Y. 1991). "Faded memories or unavailable witnesses are inherent in any delay, even if justifiable. To merit a dismissal a defendant must demonstrate a substantial, actual prejudice to his ability to defend himself." United States v. Long, 697 F. Supp. 651, 657 (S.D.N.Y. 1988).
According to defendants, as a result of pre-indictment delay, "Wrapwell's [business] records are no longer available, and the necessary testimony and records of key customers and suppliers are also no longer available." Defs' Mem. Supp. Mot. to Dismiss ("Defs' Mem."), dated April 3, 2003, at 19. Additionally, defendants assert that the accounting papers prepared by Wrapwell's accountant and used for the purpose of obtaining refinancing of their outstanding obligations with First New York no longer exist. Kleinberg Aff., Ex. F. Defendants have provided the Court with the names of several persons and companies alleged to have conducted business with Wrapwell and who are now deceased or otherwise unavailable to assist the defense in this matter. Kleinberg Aff. at ¶¶ 44-45. However, defendants have not presented evidence that the companies that are now out of business no longer have relevant financial records still available, nor are there any former officers or directors of those companies that cannot be located. Additionally, although the defendants' accountant asserts that he no longer has the relevant financial documents available, his affidavit demonstrates that he has sufficient recall of the relevant events. Kleinberg Aff., Ex. F. Further, the civil matter related to these transactions concluded in January 2002. It seems likely to the Court that documents used so recently in that matter would still be available to the defendants for their use in defending against the charges in this indictment.
Although defendants have cited a number of instances in which persons might not be available to testify in this case, overall they have not presented the Court with sufficient evidence to demonstrate that the length of time between their actions and the indictment has caused them substantial and actual prejudice to their ability to defend themselves.
B. UNJUSTIFIABLE GOVERNMENT CONDUCT
Unjustifiable Government conduct has typically meant that the Government delayed the indictment in question to gain an unfair tactical advantage over the accused. United States v. Marion, 404 U.S. 307, 324 (1971). Prosecutorial negligence, such as "[b]reaucratic oversight and lack of proper case administration does not rise to the level of conduct which justifies dismissing a criminal indictment." United States v. Harrison, 764 F. Supp. 29, 33 (S.D.N.Y. 1991).
Defendants allege that the Government "by its own negligence, or indifference, or choice . . ." allowed the investigation of defendants' conduct to languish for no reason, resulting in substantial prejudice to the defendants. Def's Mem. at 25. Defendants allege that the Government, through the F.D.I.C., was in possession of the key documents and facts in this case to support the charges in the indictment as early as 1993.
Regardless, defendants have not presented any evidence demonstrating that the Government sought to, or did, gain any tactical advantage through a deliberate delay. Other than citing the length of time between the onset of the defendants' actions and the time of the indictment, defendants put forth no evidence that the Government engaged in any deliberate actions to delay the indictment in this case for its own benefit. The Government maintains that it did not engage in any deliberate tactic to delay the indictment in this case and the defendants' course of alleged criminal conduct did not become apparent to the Bank until November 1999, during the course of discovery in the civil case. Gov't Opp. at 20-21. In United States v. Snyder, 668 F.2d 686 (2d Cir. 1982), the Second Circuit found where a case had been delayed in part by related civil proceedings, the delay was not evidence of the Government's attempt to gain an improper tactical advantage. Additionally, in United States v. Finkelstein, 526 F.2d 517 (2d Cir. 1975), the Second Circuit also held that there was no evidence of a deliberate delay on the part of the Government where a criminal investigation was initiated after reference from the Securities and Exchange Commission after commencement of related civil proceedings. Accordingly, without further proof from the defendants as to the Government's deliberate and unjustifiable conduct in this matter, defendants' have failed to prove the "deliberate device" element of their due process claim and their motion to dismiss the indictment based upon undue delay is denied.
III. PROSECUTORIAL MISCONDUCT
Defendants also argue that the indictment should be dismissed because of misconduct on the part of the prosecutor. Specifically, defendants assert that the prosecutor presented the grand jury with misleading and false information, preventing the grand jury from making an informed and objective evaluation of the evidence and causing it to return an indictment in this matter. Defendants claim that the prosecutor misled the grand jury with respect to whether the June and September agreements were not "repayment agreements obligating the defendants to entire pay off the $3 million loan," and whether the $700,000 in accounts receivable received by Republic Bank was personally "turned over" by defendants. Defs' Reply Mem. of Law in Supp. of Motion to Dismiss ("Defs' Reply"), dated April 28, 2003, at 5-6.
Defendants have not presented a valid basis for dismissing the Indictment. "Grand jury proceedings carry a presumption of regularity." United States v. Torres, 901 F.2d 205, 232-33 (2d Cir. 1990) (citations and quotation omitted). This presumption can be overcome when a defendant presents "specific factual allegations of governmental misconduct." Id.
In this case, Defendants have not offered any credible factual allegations of Government misconduct. Instead, Defendants' assertions, which are disputed by the Government, amount to a challenge to the reliability or sufficiency of the evidence presented to the grand jury, even though defendants have attempted to artfully phrase their objection to the proceedings as misconduct that "undermined the Grand Jury's ability to make an informed and objective evaluation of the evidence" rather than an attack on the sufficiency of the evidence. Defs' Reply at 1.
In United States v. Williams, 504 U.S. 36 (1992), the Court barred any challenge to the sufficiency of evidence before the grand jury, and then continued:
It would make little sense, we think, to abstain from reviewing the evidentiary support for the grand jury's judgment while scrutinizing the sufficiency of the prosecutor's presentation. A complaint about the quality or adequacy of the evidence can always be recast as a complaint that the prosecutor's presentation was "incomplete" or misleading.Id. at 54-55. The Williams Court concluded that reviewing facially valid indictments on such grounds "would run counter to the whole history of the grand jury institution[,] [and] [n]either justice nor the concept of fair trial requires [it]."Id. (quoting Costello v. United States, 350 U.S. 349, 364 (1956)).
The indictment in this case is valid on its face. Consequently, defendants' argument that the indictment was based on misleading information, even if correct, would not provide grounds to dismiss it. See United States v. Bok, No. 95 Cr. 403, 1997 WL 148815, *3 (S.D.N.Y. Mar. 27, 1997). Therefore, defendants' motion to dismiss the indictment because of the alleged presentation of misleading information to the grand jury is denied.
IV. BILL OF PARTICULARS
Defendants argue that they are entitled to a bill of particulars pursuant to Federal Rule of Criminal Procedure 7(f). Specifically, defendants request, among other things, statements from the Government concerning the names of persons at the Bank, dates of specific transactions or conversations, identification of documents purportedly used in the fraud, and the specific subsection of 18 U.S.C. § 1344 under which the crime was alleged to have been committed. Kleinberg Aff. at ¶ 3, Ex. G.
Rule 7(f) . . . permits a defendant to seek a bill of particulars in order to identify with sufficient particularity the nature of the charge pending against him, thereby enabling defendant to prepare for trial, to prevent surprise, and to interpose a plea of double jeopardy should he be prosecuted a second time for the same offense. . . . Generally, if the information sought by the defendant is provided in the indictment or in some acceptable alternative form, no bill of particulars is required.United States v. Bortnovsky, 820 F.2d 572, 574 (2d Cir. 1987);see also United States v. Conley, 2002 WL 252766 at *4.
The decision whether to grant a bill of particulars rests within the sound discretion of the district court. See United States v. Cephas, 937 F.2d 816, 823 (2d Cir. 1991); United States v. Reddy, 2002 WL 15610 at *5. The Second Circuit has "consistently sustained indictments which track the language of a statute and, in addition, do little more than state time and place in approximate terms." United States v. Salazar, 485 F.2d 1272, 1277 (2d Cir. 1973) (citing United States v. Fortunato, 402 F.2d 79, 82 (2d Cir. 1968)). Therefore, a "bill of particulars should be 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. Torres, 901 F.2d 205, 234 (2d Cir. 1990); United States v. Conley, 2002 WL 252766 at *4.
A bill of particulars is not meant to be a tool to compel disclosure of the Government's case before trial. See United States v. Gottlieb, 493 F.2d 987, 994 (2d Cir. 1974); United States v. Nova-Nunez, No. 96 Cr. 599, 1997 WL 30965, *4 (S.D.N.Y. Jan. 24, 1997). The Government is not required to disclose the manner in which it will attempt to prove the charges, nor the means by which the crimes charged were committed. Therefore, "the Government is not required to provide information that would, in effect, give the defendant a preview of the Government's case before trial." United States v. Conley, 2002 WL 252766 at *4.
In deciding a motion for a bill of particulars, "[t]he important question is whether the information sought is necessary, not whether it is helpful." United States v. Facciolo, 753 F. Supp. 449, 451 (S.D.N.Y. 1990). Here, the Government argues that the indictment and discovery provide defendants with ample notice of the nature of the charges against them. Gov't Opp. at 28. Pursuant to United States v. Jimenez, 824 F. Supp. 351, 363 (S.D.N.Y. 1993), a defendant is not entitled information such as the "wheres whens and whoms" of the Government's case, disclosure of which could serve to limit the Government's proof at trial. The indictment in this case clearly specifies the nature of the acts with which the defendants are charged and the methods by which those acts were accomplished. The indictment also identifies the dates and places where and when the alleged events occurred, and the means and methods by which the conspiracy was carried out. The information sought by defendants is exactly the type "routinely denied in the Second Circuit," United States v. Henry, 861 F. Supp. 1190, 1193 (S.D.N.Y. 1994), and therefore, defendants' request for a bill of particulars is denied.
V. RULE 16 DISCOVERY
Defendants move for an order directing the disclosure, inspection and copying of (1) all written and recorded statements made by the defendants; (2) all relevant statements and documents containing statements of any past employee of Wrapwell Corp.; (3) all relevant statements made by any employee of Bank of New York and of the F.D.I.C.; (4) all relevant statements by any person interviewed for this investigation; and (5) various documentary evidence including bank ledgers, statements, loan agreements, and financial documents. See Kleinberg Aff. at ¶ 4, Ex. H.
However, as noted by the Government, Local Criminal Rule 16.1 requires counsel to endeavor to resolve discovery matters before raising such issues with the Court. Defendants have failed to provide a Rule 16.1 affidavit in support of their discovery motion, and the Government asserts that it has provided counsel for the defendants with discovery pursuant to Rule 16 in August 2002, and no further discovery has been requested by the defendants. Accordingly, the parties are ordered to meet and confer regarding discovery prior to applying to the Court for further assistance. Defendants' motion for discovery pursuant to Rule 16 is therefore denied. See United States v. Guevara, No. 99 Cr. 445, 1999 WL 639720, *2 (S.D.N.Y. Aug. 23, 1999) (failure to file affidavit merits denial of motion to compel "various sorts of discovery"); United States v. Ahmad, 992 F. Supp. 682, 684-85 (S.D.N.Y. 1998) (discovery motion denied because filing such a motion "without the requisite affidavit contravenes Rule 16.1").
VI. RULE 404(b) NOTICE
Defendants also seek disclosure of any evidence of their own prior bad acts that the Government will seek to offer at trial.
Rule 404(b) allows the admission of evidence of other crimes, wrongs, or acts in order to prove "motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident, provided that upon the request by the accused, the prosecution in a criminal case shall provide reasonable notice in advance of trial, or during trial if the court excludes pretrial notice on good cause shown, of the general nature of any such evidence it intends to introduce at trial." Fed.R.Evid. 404(b).
The Government represents that prior to the commencement of trial, it shall provide timely Rule 404(b) notice to the defendants. It has been the practice of courts in this circuit to deem notice afforded more than ten working days before trial as "reasonable" within the meaning of Rule 404(b). See, e.g., United States v. Greco, No. 85 Cr. 961, 1994 WL 202605, *2 (S.D.N.Y. May 23, 1994); United States v. Richardson, 837 F. Supp. 570, 575 (S.D.N.Y. 1993). The Defendant's motion is granted in so far as the Government is hereby ordered to provide notice of its Rule 404(b) evidence no later than two weeks prior to the commencement of the trial in this matter. This disclosure schedule will allow the Court to consider any Rule 404(b) motions in limine without interruption of the trial in this matter.
VII. BRADY, AND GIGLIO MATERIAL
Defendants seek an order for the production of all material required to be produced pursuant to Brady v. Maryland, 373 U.S. 83, 87 (1963). In response, the Government asserts that it is not presently aware of Brady material pertaining to defendants, and has advised defense counsel that it will provide timely disclosure is any such material comes to light. Gov't Opp. at 29. The Court accepts the Government's representation with regard to such materials, and the Defendant's motion for preservation of evidence is granted to that extent. See United States v. Triana-Mateus, No.
98 Cr. 958, 2002 WL 562649, *2 (S.D.N.Y. Apr. 15, 2002). In regard to the defendants' request for production pursuant toGiglio v. United States, 450 U.S. 150, 154 (1972), the Government correctly notes that it is not required to produce such material until it produces "3500 material" pursuant to the Jenks Act. United States v. Coppa, 267 F.3d 132, 145-46 (2d Cir. 2001). The Court accepts the Government's representation that it will produce Giglio material in sufficient time for its effective use at trial, and defendants' motion for production of such material at this time is denied.
SO ORDERED.