Opinion
No. 1:CR-42-146-02
December 17, 2002
MEMORANDUM
Before the court is Defendant Franklin Brown's motion to sever counts based cm improper joinder under Federal Rule of Criminal Procedure 8(a) and Prejudicial Joinder under Federal Rule 14. The parties have briefed the issue, and the matter is ripe for disposition.
Also before the court is Defendant's request for oral argument pursuant to Middle District Local Rule 7.9. Because the court, in the order accompanying this memorandum, will deny Defendant's motion for severance, Defendant's request for oral argument will be denied as moot.
I. Background
On June 21, 2002, a federal grand jury sitting in Harrisburg, Pennsylvania issued a thirty-seven count indictment against four Defendants, all former officers and directors for the Rite Aid Corporation. Count 1 of the indictment alleges that Defendants Brown, Grass and Bergonzi, engaged in a conspiracy intended to enrich themselves by defrauding Rite Aid and its stockholders, creditors, and vendors. The Government also charges Defendants Brown, Grass and Bergonzi with securities fraud (Count 2), false statements to the Securities and Exchange Commission ("SEC") (Counts 3-11), mail fraud relating to allegedly fraudulent invoices to vendors (Counts 16-25), wire fraud relating to payment of bonuses based upon the allegedly improper financial results (Counts 27-. 29), and criminal forfeiture (Count 32). The indictment also charges that the conspiracy to defraud — Count 1 — encompassed certain actions relating to unauthorized executive compensation and a failure to disclose certain related-party transactions on the part of Defendant Grass. The indictment also charges that Defendant made false statements to the SEC (Counts 12-15) and committed wire fraud (Counts 26, 30-31). (Collectively, Counts 1 through 32 will hereinafter be referred to as the "Fraud Counts").
The other Defendants charged in the indictment are Martin Grass, Franklyn Bergonzi, and Eric Sorkin.
For a more comprehensive factual background of the charges in Count 1 see the court's December 10, 2002 memorandum and order denying Defendants Grass, Brown and Sorkin's motion to dismiss. United States v. Grass, et al, Nos. 02-746-01, 02, 03, slip op. at 1-4 (M.D. Pa. Dec. 10, 2002).
Count 33 of the indictment alleges that Defendants Brown, Grass and Sorkin engaged in a criminal conspiracy to obstruct ongoing investigations by the SEC, the Federal Bureau of Investigations, and the Grand Jury. The indictment also alleges that Defendants Brown and Grass obstructed a grand jury proceeding (Count 34), obstructed a government agency proceeding (Count 35), and engaged in witness tampering (Count 36). Count 37 alleges that Defendant Sorkin made false declarations before the grand jury. (Collectively, Counts 33 through 37 will hereinafter be referred to as the "Obstruction Counts"). Thus, Defendant Brown is charged in thirty-six of the thirty-seven counts of the indictment. II. Discussion A. Joinder is proper under Federal Rule 8.
The only count Defendant Brown is not charged with is Count 37. In that count, the Government charges that Defendant Sorkin, alone, made false statements to the grand jury.
Defendant Brown argues that the Fraud Counts (Counts 1-32) should be severed from the Obstruction Counts (Counts 33-37) because they were improperly joined under Federal Rule of Criminal Procedure 8(a). Specifically, Defendant argues that the Fraud Counts and the Obstruction Counts are "clearly not 'of the same or similar character,'" within the meaning of Federal Rule 8(a). (Def. Memo. in Supp. of Mot. to Sever at 8 (quoting Federal Rule 8(a).) Moreover, Defendant argues, that "the counts do not have a sufficient transactional nexus to permit joinder under Rule 8(a) and should be severed into separate trials." ( Id. at 10.)
As of December 1, 2002, the Federal Rules of Criminal Procedure were amended. The Advisory Committee Notes following Federal Rule 8 state that the "changes are intended to be stylistic only." Fed.R.Crim.P. 8 advisory committee's note. Accordingly, all references in this memorandum to Federal Rule of Criminal Procedure 8 refer to the rule as amended.
The Government argues that the fraud conspiracy — Count 1 — involving Defendants Brown, Grass, and Bergonzi overlaps "both temporally and substantively" with the obstruction conspiracy Count 33 — involving Defendants Brown, Grass, and Sorkin. (Govt. Memo. in Resp. to Def Mot. to Sever at 5.) Moreover, the Government argues that the conspiracy to obstruct justice "flowed directly from the broader fraud conspiracy and [was] calculated to hamper the efforts of new management . . . criminal investigators . . . and ultimately shareholders to uncover the truth behind Rite Aid's financial statements." ( Id.) Accordingly, the Government contends that the Fraud Counts and the Obstruction Counts are "integrally related . . . and joinder under Rule 8(b) is entirely appropriate." ( Id. at 7.) Because the court finds that the Fraud Counts and the Obstruction Counts have a common transactional nexus, the court will deny Defendant's motion to sever under Federal Rule 8.
As an initial matter, the court must address whether the instant motion is governed by Federal Rule of Criminal Procedure 8(a) or 8(b). Defendant brought his motion to sever under Federal Rule 8(a). ( See Def. Mot. to Sever at 1; see also Def. Reply Br. at 2, n. 1.) The Government, in its response, addressed the motion as if it were brought under Federal Rule 8(b). ( See Govt. Resp. to Def. Mot. to Sever at 2.) The court finds the decision of which Rule applies to be immaterial because the results of its analysis are the same under both Federal Rule 8(a) and (b).
The standards of Rule 8(a) and (b) are almost identical. "Both permit joinder of offenses and defendants, respectively, when a transactional nexus exists between the offenses or defendants to be joined." United States v. Eufrasio, 935 F.2d 533, 570. n. 2 (3d Cir. 1991). The Rules state:
(a) Joinder of Offenses. The indictment or information may charge a defendant in separate counts with 2 or more offenses if the offenses charged — whether felonies or misdemeanors or both — are of the same or similar character, or are based on the same act or transaction, or are connected with or constitute parts of a common scheme of plan.
(b) Joinder of Defendants. The indictment or information may charge 2 or more defendants if they are alleged to have participated in the same act or transactions, constituting an offense or offenses. The defendants may be charged in one or more of the counts together or separately. All defendants need not be charged in each count.
Fed.R. Grim. P. 8. In interpreting these two provisions, the Third Circuit, stated, in dicta, that:
Theoretically, then, Rule 8(a) provides wider latitude for joinder than does Rule 8(b). Nonetheless, in many cases the focus of joinder of offenses or defendants will be the same: do the offenses or defendants to be joined arise out of a common series of acts or transactions. This need not always be the case.
Accordingly, it seems to us that contrary to the jurisprudence of other circuits, when a joinder of offenses charged aginst the same defendant is challenged, the literal meaning of the Rule requires application of Rule 8(a), irrespective of whether multiple defendants are involved in the case.Eufrasio, 935 F.2d at 570, n. 2 (emphasis added). Despite the explicit language quoted above, the court ultimately applied Rule 8(b), stating that it made no difference whether Rule 8(a) or (b) applied because the outcome would be the same. Id. at 570-71. The Eufrasio coat concluded that "[i]n the interests of justice, we apply the less permissive standard of Rule 8(b) . . . to hold there was no misjoinder of the . . . counts against [defendant]." Id. This court finds that same to be true in the instant case. Thus, in the interests of justice, the court will apply the less permissive joinder standard under Rule 8(b). Even under the stricter "same act or transaction" standard of Rule 8(b), joinder is proper in the instant case.
"Joinder of charges is the rule rather than the exception and Rule 8 is construed liberally in favor of initial joinder." United States v. Bullock, 71 F.3d 171, 174 (5th Cir. 1995). Moreover, "there is a preference in the federal system for joint trials of defendants who are indicted together. Joint trials 'play a vital role on the criminal justice system. . . .' They promote efficiency and "serve the interests of justice by avoiding the scandal and inequity of inconsistent verdicts.'" Zafiro v. United States, 506 U.S. 534, 537 (1993) (quoting Richardson v. Marsh, 481 U.S. 200, 209 (1987)). As the Third Circuit stated, "As long as the crimes charged are allegedly a single series of acts or transactions, separate trials are not required." Eufrasio, 935 F.2d at 567.
In making a determination whether joinder is proper, the court "may look beyond the face of the indictment in limited circumstances." United States v. McGill, 964 F.2d 222, 242 (3d Cir. 1992). "Where representations made in pretrial documents other than the indictment clarify factual connections between the counts, reference to those documents is permitted." Id. Moreover, the party claiming misjoinder bears the burden of persuasion, United States v. Natanel, 938 F.2d 302, 306 (1st Cir. 1991). In the instant case, it is clear that the crimes charged are a single series of acts or transactions, thus, joinder is proper under Federal Rule 8.
Here, the Government alleges that Defendant Brown participated with Defendants Grass and Bergonzi in a fraud conspiracy; the underlying purpose of which was to hide the true financial condition of Rite Aid. (Govt. Br. in Resp. to Def. Mot. to Sever at 4; see also Indictment at Count 1.) The alleged conspiracy to obstruct justice flowed directly from the broader fraud conspiracy and was calculated to conceal the underlying fraud from Rite Aid, its shareholders, the Government, and the public in general. (Govt. Br. in Resp. to Def. Mot. to Sever at 5.) Moreover, the Fraud Counts allege that Defendant used back-dated severance letters to defraud Rite Aid of significant amounts of money. (Indictment Count 1, ¶¶ 34, 135-136). Similarly, the Obstruction Counts allege that these letters constitute a part of the manner and means and overt acts in furtherance of the obstruction conspiracy. ( Id., Count 33 ¶ 7(e); Count 37 ¶ 3.) Thus, the two conspiracies, while distinct in operation, appear to constitute a single series of acts or transactions.
Defendant contends, that because the Fraud Counts and the Obstruction Counts are charged as two distinct conspiracies they cannot constitute a single series of acts or transactions. (Def. Reply Br. at 3) Defendant's position, however, is too broad. All that is required, for joinder to be proper, is that there exist a "transactional nexus" among all of the counts joined together in a single indictment. Eufrasio, 935 F.2d at 570, n. 2. Here, the conspiracies charged were not separate and distinct. Rather, they were substantially interrelated in their facts, common aims, and common participants. Joinder under these circumstances is permissible under Federal Rule 8. See United States v. Posada-Rios, 158 F.3d 832, 862 (5th Cir. 1998) (holding that defendant was properly joined even though charged in conspiracies to distribute cocaine with co-defendant, but not charged with same co-defendant in RICO count, because the two conspiracies were "substantially interrelated by their facts and common aims").
Moreover, other courts have found, for the purposes of Rule 8(b) joinder, that obstruction of justice and perjury charges are "integrally related" to the investigation of the underlying offenses that defendants are charged with obstructing, or lying about. See, e.g., United States v. Barton, 647 F.2d 224, 239 (2d Cir. 1981) (holding that charge of obstruction of a grand jury investigation of explosive charges by one defendant was "integrally related" to possession of explosives charge of a co-defendant). Because the court finds that there is a common transactional nexus between the Fraud Counts and the Obstruction Counts it will deny Defendant Brown's motion to sever counts based on improper joinder under Federal Rule 8.
Defendants argue that Barton is inapplicable to the instant case because the "obstruction charge in Barton was limited to a specific act on a specific date that could not be separated from substantive charges that occurred on the same date." (Def. Reply Br. at 5.) Perhaps, if the two conspiracies in the instant case were wholly distinct, with different aims, objectives, motivations and participants, the court would regard Barton as distinguishable. Here, however, the fraud conspiracy involving Defendants Brown, Grass and Bergonzi overlaps both temporally and substantively with the obstruction conspiracy involving Defendants Grass, Brown and Sorkin. it is almost impossible to say, based on the allegations in the indictment, when one begins and the other ends. See supra, p. 6.
B. Prejudicial Joinder under Federal Rule 14
As of December 1, 2002, the Federal Rules of Criminal Procedure were amended. The Advisory Committee Notes following Federal Rule 14 state that the "changes are intended to be stylistic only." Fed.R.Crim.P. 14 advisory committee's note. Accordingly, all references in this memoraudum to Federal Rule of Criminal Proccdure 14 refer to the rule as amended.
Even though the court has found joinder of the Fraud Counts and the Obstruction Counts appropriate under Federal Rule 8, Federal Rule 14 recognizes that there may, nonetheless, be instances where joinder is inappropriate. Consequently, that Rule provides, in relevant part, "[i]f the joinder of offenses or defendants in an indictment . . . appears to prejudice a defendant or the government, the court may order separate trials of counts, sever the defendants' trials, or provide any other relief that justice requires." Fed.R.Crim.P. 14(a) (emphasis added). In interpreting this rule, the Supreme Court has stated:
when defendants properly have been joined under Rule 8(b), a district court 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. Such a risk might occur when evidence that the jury should not consider against a defendant and would not be admissible if a defendant were tried alone is admitted against a codefendant. . . . When the risk of prejudice is high, a district court is more likely to determine that separate trials are necessary, but . . . less drastic measures, such as limiting instructions, often will suffice to cure any risk of prejudice.Zafiro, 506 U.S. at 539.
Defendant argues that both Zafiro factors, requiring severance, are present in the instant case. First, Defendant argues that he is not alleged to have had a "material involvement in the accounting fraud" charged in Counts 1-32 of the indictment. (Def. B.R. in Supp. of Mot. to Sever at 11.) Specifically, Defendant argues that if the Fraud Counts and the Obstruction Counts are tried together, "the evidence proffered by the government in support of the Obstruction Counts will prejudice the jury and impair Brown's ability to fairly defend himself against the Fraud Counts." ( Id. at 11-12.) Second, Defendant argues that "the jury cannot be expected to ignore evidence introduced in support of the Obstruction Counts when considering the Fraud Counts." ( Id. at 12.) Because the court finds both of these grounds for severance unpersuasive, it will deny Defendant's motion.
The court finds Defendant's statement that he is not alleged to have any material involvement in the accounting fraud dubious, at best. Defendant is charged in every count of the indictment, save the perjury charge against Defendant Sorkin in Count 37. Moreover, material participation is not the standard when it comes to Rule 14. As the Third Circuit has stated, "[n]either a disparity in evidence nor the introduction of evidence more damaging to one defendant than another entitles the seemingly less culpable defendant to severance." United States v. Dickens, 695 F.2d 765, 768 (3d Cir. 1982); see also Eufrasio, 935 F.2d at 568 ("Prejudice should not be found in a joint trial just because all evidence adduced is not germane to all counts against each defendant.").
Defendant's claim that the jury cannot be expected to ignore evidence introduced in support of the Obstruction Counts when considering the Fraud Counts is equally as captious. Although the indictment is complex and detailed, the instant case is not so complex, nor is Defendant charged with counts too numerous, as to preclude the jury's ability to separately weigh the evidence as to each count and each defendant. Compare United States v. Branker, 395 F.2d 881, 887 (2d Cir. 1968) (granting severance as to four of the original twelve defendants and six co-conspirators named in an eighty-four count indictment) and United States v. Price, 13 F.3d 711, 717 (3d Cir. 1994) (affirming severance for twenty-six defendants in a thirty-two count drug conspiracy indictment) with Posado-Rios, 158 F.3d at 863 (holding no prejudice existed in trial of twelve defendants on RICO, drug trafficking and conspiracy which lasted twelve months.) Moreover, the Supreme Court has explicitly stated that "juries are presumed to follow [limiting] instructions." Zafiro, 506 U.S. at 540. Thus, the court finds that any spillover evidence from the Obstruction Counts can be cured with proper jury instructions. Because any prejudice that would occur to Defendant as a result of having the Fraud Counts and the Obstruction Counts tried together can be cured through instructions to the jury, the court will deny Defendant's motion. III. Conclusion
Such cautionary instructions may, for example, include an instruction that the jury give separate consideration to each individual Defendant and to each separate charge against him. Similarly, the court could instruct the jury that each Defendant is entitled to have his case determined from his own conduct and the evidence that may be applicable to him. Moreover, the court could admonish the jury that opening and closing statements are not evidence and that the jury should draw no inference from Defendant's exercise, if any, of his right not to testify. The court finds that instructions, similar to these, would suffice to cure any potential prejudice to Defendant from having a joint trial on both the Fraud and Obstruction Counts.
In accordance with the preceding discussion, the court will deny Defendant's motion to sever counts based on improper joinder under Rule 8(a) and prejudicial joinder under Rule 14. An appropriate order will issue.