U.S. v. Ohle III
U.S. v. Ohle III
2011 WL 651849 (S.D.N.Y. 2011)
February 7, 2011
Rakoff, Jed S., United States District Judge
Summary
The Court found that the Government did not violate its Brady obligations, as the documents at issue were available for inspection upon request and all but a handful were included as part of the pretrial electronic discovery. The Court also found that the documents were not material, as they did not put the whole case in such a different light as to undermine confidence in the verdict. As a result, the Court denied the defendants' motion for a new trial.
UNITED STATES of America,
v.
John B. OHLE III, and William E. Bradley, Defendants
v.
John B. OHLE III, and William E. Bradley, Defendants
No. S3 08 CR 1109(JSR)
United States District Court, S.D. New York
February 07, 2011
Rakoff, Jed S., United States District Judge
MEMORANDUM ORDER
*1 On August 11, 2009, the Government filed an eight-count Second Superseding Indictment against defendants John B. Ohle III and William E. Bradley. The Honorable Leonard B. Sand, to whom the case was then assigned, severed three counts of the Second Superseding Indictment, and the Government proceeded to trial on the severed counts, subsequently recast as the Third Superseding Indictment. Count One charged Ohle and Bradley with conspiracy in violation of 18 U.S.C. § 371. As charged to the jury, the conspiracy had two objects: (1) to commit wire fraud by obtaining fees, directly or indirectly, from Bank One; and (2) to defraud the Internal Revenue Service. Counts Two and Three charged Ohle alone with tax evasion in violation of 26 U.S.C. § 7201 for the years 2001 and 2002, respectively.
On June 2, 2010, following a trial that lasted approximately three weeks, the jury found Ohle and Bradley guilty of all counts of which they were charged. In response to a special interrogatory, the jury found that the Government had proven the guilt of both defendants with respect to both alleged objects of the Count One conspiracy.[1]
On December 17, 2010, Ohle filed a motion for a new trial, which was joined by Bradley. The Government filed its opposition to the motion on December 30, 2010, and Ohle filed a reply on January 7, 2011. The Court heard oral argument on the motion on January 13, 2011, and, after careful consideration, denied the motion from the bench. This Memorandum sets forth the reasons for the Court's decision.
Defendants argue they are entitled to a new trial because the Government failed to fulfill its obligations under Brady v. Maryland, 373 U.S. 83, 87, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1965), to turn over to the defendant evidence in its possession that is both favorable to the accused and material to the issue of guilt or punishment. They also argue that the Government presented arguments at trial that it knew or should have known were false and misleading. Def. Reply. Mem. at 2. According to the defendants, the Government's alleged misconduct entitles them to a new trial pursuant to Fed.R.Crim.P. Rule 33. Alternatively, they argue that they are entitled at least to an evidentiary hearing regarding the circumstances of the Government's alleged failure to produce material evidence.
The background facts on which defendants' arguments are premised are as follows. During the Fatico hearing on September 17, 2010, counsel for the defendants informed the Court that the Government had recently sent a letter to defense counsel in the related case of United States v. Daugerdas, et al., S3 09 Cr. 581(WHP); the letter indicated that there were over 100 boxes of documents from the law firm of Jenkens & Gilchrist (“J & G”) that had not been turned over to defense counsel for Ohle and Bradley. Def. Mem. at 3. The letter explained that although the Government had previously believed that all 500–plus boxes of documents from J & G had been scanned into an electronic Concordance database and provided to the defense, it discovered around Labor Day 2010 that the contents of approximately 110 boxes had not in fact been scanned. Id.
*2 The Court adjourned defendants' sentencing (then scheduled to take place on October 14, 2010) to November 19, 2010 to enable defendants to review the unscanned documents. In the meantime, the Government provided defense counsel all the contents of the boxes in a searchable database. Gov. Mem. at 3. It also provided Ohle with a DVD of the documents in an image format and made the originals of the documents and disks available to Ohle for inspection. Id. at 3–4. Ohle began to analyze the documents, but was unable to complete the review by the deadline. According to Ohle, his review “was extended considerably when it came to light that one of the unproduced boxes itself contained fifteen disks filled with relevant information.” Def. Mem. at 5. The Government copied the disks onto a hard drive, but Ohle contends the hard drive was not indexed and was therefore difficult to review. Id. Accordingly, the Court again adjourned the sentencing to January 14, 2011, and directed that any motion for a new trial be filed no later than December 17, 2010. Id. Because of a subsequent scheduling conflict, the sentencing was moved up one day, and oral argument on defendants' motion and sentencing took place on January 13, 2011.
In their initial Memorandum, defendants argue that the documents in the J & G boxes—specifically the 33 exhibits attached to their Memorandum—constitute “previously undisclosed evidence.” Def. Mem. at 3. The Court assumes for the purposes of this motion that this evidence is more favorable than detrimental to the defense, although this is far from clear. However, it turns out that copies of almost all of the J & G documents were previously provided to the defendants as part of the Government's pre-trial discovery. For example, the Government has provided 33 exhibits of its own that correspond to the exhibits referenced by the defendants in the instant motion; each is Bates-stamped with the prefix “JGZ,” definitively proving that these documents were produced to the defendants prior to trial.[2] More generally, the Government has produced a chart indicating exactly which documents were part of the electronic discovery and which were not. See Declaration of Stanley J. Okula, Jr. (dated December 30, 2010) ¶ 2. Although defendants have professed difficulty in locating some of the documents, see Def. Mem. at 5 n. 1; 01/13/11 Transcript, the Court finds that all but a handful of the documents were in fact included in the Government's pretrial electronic discovery. Additionally, it is undisputed that the original copies of the documents in the J & G documents were available to the defendants from the outset of the case, had they made a request to inspect those originals. Gov. Mem. at 2.
Defendants nonetheless argue that these disclosures were insufficient to satisfy the Government's Brady obligations. To establish a Brady violation, a defendant must show “(1) that the government failed to disclose favorable evidence, and (2) that the evidence it ‘suppressed’ was material.” United States v. Payne, 63 F.3d 1200, 1208 (2d Cir.1995). Under Brady and its progeny, the Government has a duty to disclose favorable evidence known to it, even if the defense makes no specific disclosure request. Id.; see also Kyles v. Whitley, 514 U.S. 419, 505, 115 S.Ct. 1555, 131 L.Ed.2d 490 (1995). However, “evidence is not considered to have been suppressed within the meaning of the Brady doctrine if the defendant or his attorney either knew, or should have known, of the essential facts permitting him to take advantage of that evidence.” Id. (internal quotation marks, citations, and brackets omitted).
*3 Defendants contend that the Government cannot discharge its Brady obligations by turning over exculpatory documents as part of “a voluminous file that is unduly onerous to access.” Def. Reply Mem. at 2 (quoting United States v. Skilling, 554 F.3d 529, 577 (5th Cir.2009), aff'd in part and vacated on other grounds, ––– U.S. ––––, 130 S.Ct. 2896, 177 L.Ed.2d 619 (2010)). In this case, defendants note that the “database that the government produced comprises several gigabytes of data, including millions of separate files extending to several million pages in length. [Moreover], the ‘database’ consists of nine separate databases ... [, and any] document search has to be conducted on a database-by-database basis.” Id. Defendants cite United States v. Salyer, Cr. No. S–10–0061 LKK (GGH), 2010 WL 3036444 (E.D.Cal., Aug. 2, 2010), to the effect that “the government cannot meet its Brady obligations by providing [the defendant] with access to 600,000 documents and then claiming that she should have been able to find the exculpatory information in the haystack.” Id. at *6 (quoting United States v. Hsia, 24 F.Supp.2d 14, 29–30 (D.D.C.1998), rvs'd in part on other grounds, 176 F.3d 517 (D.C.Cir.1999)). Thus, defendants maintain that even though all of the documents at issue were available for inspection upon request and all but a handful were included as part of the pretrial electronic discovery, the Government violated Brady because the materials were unduly onerous to access.
However, the principal case defendants cite in support of this proposition, United States v. Skilling, 554 F.3d 529, 577 (5th Cir.2009), is far more nuanced that defendants suggest. The Fifth Circuit first noted that there is “little case law on whether a voluminous open file can itself violate Brady, and the outcomes of these cases seem to turn on what the government does in addition to allowing access to a voluminous open file.” 554 F.3d at 577. In Skilling, the Government “did much more than drop several hundred million pages on Skilling's doorstep.” Id. Instead, the file was electronic, indexed, and searchable, and the Government highlighted particularly relevant documents. Id. Although Skilling argued that the Government should have scoured the open file in search of every piece of potentially exculpatory evidence, the Court determined that the Government “was in no better position to locate any potentially exculpatory evidence than was Skilling.” Id. Thus, although the Court did not hold that the use of a voluminous open file could never violate Brady, especially if there were “evidence that the government ‘padded’ an open file with pointless or superfluous information to frustrate a defendant's review of the file,” the Court determined that, in light of “the additional steps the government took beyond merely providing Skilling with the open file, the equal access that Skilling and the government had to the open file, the complexity of Skilling's case, and the absence of evidence that the government used the open file to hide potentially exculpatory evidence or otherwise acted in bad faith, we hold that the government's use of the open file did not violate Brady.” Id.
*4 The general principles articulated by the Skilling court are particularly relevant here. Undoubtedly there were many documents—not least because of the efforts that the defendants and their co-conspirators took to obscure their egregious fraud—but the Government, to facilitate review of the documents, provided defense counsel with an electronically searchable Concordance database. Both the Government and defense counsel had equal access to this database. Thus, the defendants were just as likely to uncover the purportedly exculpatory evidence as was the Government. Moreover, as a general rule, the Government is under no duty to direct a defendant to exculpatory evidence within a larger mass of disclosed evidence. See United States v. Mulderig, 120 F.3d 534, 541 (5th Cir.1997); United–States v. Alvarado, No. 01 Cr. 156(RPP), 2001 U.S. Dist. LEXIS 21100, at *13–14 (S.D.N.Y.2001) (“The Defendants have pointed to no authority for the proposition that where there is a large mass of material that has been made available to the Defendants, it is the Government's duty to root out Brady material for the Defendants. Indeed the only authority is to the contrary.”)[3]
The defendants further argue that, notwithstanding the equal access of both sides to the database in question, the Government may have a heightened obligation to uncover exculpatory evidence in light of its allegedly extensive resources and subpoena powers. See 01/13/11 Transcript. The Court rejects this argument. “While the Supreme Court in Brady held that the Government may not properly conceal exculpatory evidence from a defendant, it does not place any burden upon the Government to conduct a defendant's investigation or assist in the presentation of the defense's case.” United States v. Marrero, 904 F.2d 251, 261 (5th Cir.1990). Placing a higher burden on the Government to uncover such evidence would place prosecutors in the untenable position of having to prepare both sides of the case at once. Indeed, the adversarial system presumes that the defense will be more highly motivated to uncover exculpatory evidence, so if anything the onus is on defense counsel to conduct a more diligent search for material potentially favorable to his client. This is especially true considering that, if exculpatory evidence exists, the defense is in the best position to know what such evidence might be and where it might be located.
As the Court noted in United States v. Skilling, 554 F.3d 529, 577 (5th Cir.2009), exceptions to these general principles may exist if it is found that the Government deliberately hid documents within a larger mass of materials or somehow purposefully confounded the defendant's search for exculpatory material. As this Court previously found, however, see 01/13/11 Transcript at 26, there is no evidence of bad faith that has been proffered in this case. Accordingly, the Court holds that the Government did not violate Brady by failing to specifically highlight the particular documents defendants now claim are relevant to the defendants' case.
*5 Moreover, even if one were to assume, totally contrary to fact, that the Government did suppress evidence, the documents at issue are not material. Undisclosed evidence is material “only if there is a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different.” United States v. Bagley, 473 U.S. 667, 682, 105 S.Ct. 3375, 87 L.Ed.2d 481 (1985) (opinion of Blackmun, J.). A “reasonable probability” is “a probability sufficient to undermine confidence in the outcome” of the case. Id. Thus, the undisclosed evidence is material only if it “could reasonably be taken to put the whole case in such a different light as to undermine confidence in the verdict.” Kyles v. Whitley, 514 U.S. 419, 435, 115 S.Ct. 1555, 131 L.Ed.2d 490 (1995).
None of the thirty-three “new” exhibits now proffered by the defense comes close to meeting this standard, either alone or in combination. Consider, for example, the principal issues as to which the defendants contend that certain of these documents pertain:
First, the Court charged the jury during the trial that “[w]hile the Government need not prove that the defendant you are considering intended to defraud a particular victim, such as Bank One, but only that he had an intent to defraud someone, the Government must still prove that the conspiracy, if carried out, would foreseeably have resulted in the fraudulent obtaining of monies, directly or indirectly, from Bank One.” Jury Instructions, p. 17. According to the defendants, the Government's theory on this charge was that Ohle, Bradley and others conspired to have J & G pay fees, which the Government characterized as “referral fees,” to Bradley, Douglas Steger, and Invested Interest. Def. Mem. at 12. J & G deducted these fees from the amount to which Bank One otherwise would have been entitled—1.8% of the tax loss involved in the HOMER transaction. Id.
Defendants contend, however, that two “newly discovered” documents, both of which were included in the electronic database,[4] undermine this theory. The defendants' first two exhibits consist of the handwritten notes of Michael Cook, head of the J & G tax department, which state: “1% Bank One unless Bank One [sentence is incomplete in the notes].” Id. at 14 (citing Ohle Exhibits 1 and 2). Defendants contend this notation proves that the agreed-upon Bank One fee was 1%, and that “[a]nything that Bank One received over 1%, regardless of whether or not referral fees or any other third party fees were paid in the transaction, was the product of case-by-case negotiation between Bank One and J & G and did not reflect any additional entitlement for Bank One.” Id. at 15. The second document, defendants' third exhibit, is a spreadsheet that defendants believe shows Bank One receiving a fee of 1%. Id. (citing Ohle Exhibit 3).
The Government responds that the Cook notes are, on their face, incomplete and ambiguous. Gov. Mem. at 6. Additionally, the notes were written in late October 2001, and therefore “reflect a fee arrangement that preceded the consummation of the HOMER transactions. Consequently, the Cook notes do not accurately reflect the actual division of fees after the close of the transactions.” Id. As to the spreadsheet, the Government argues that it is “completely irrelevant because it does not even pertain to the HOMER transaction. Instead, it pertains to J & G's ‘short swaps' or ‘BLISS' tax shelter, which was a tax shelter in which HOMER client David Ducote and certain family members participated at the suggestion of Bank One.” Id.[5]
*6 The Court agrees with the Government. The ambiguous notes of Michael Cook do not undermine the jury's verdict, especially in light of the substantial evidence presented during trial that Bank One was entitled to a fee of 1.8% and that “the conspiracy, if carried out, would foreseeably have resulted in the fraudulent obtaining of monies, directly or indirectly, from Bank One.” Jury Instructions, p. 17. The Court also agrees that the spreadsheet is irrelevant as it does not pertain to the HOMER transaction.
Second, defendants argue that “new documents,” all of which were contained in the electronic database, disprove the existence of a single conspiracy. As summarized by the defendants, the Government connected the Carpe Diem investments involving the Ames family and the “referral fee” scheme through the following logical steps: (1) the HOMER transaction required a “third party” who would purchase the unitrust remainder interest as part of the transaction, and Ohle arranged for Kenneth Brown to perform this function; (2) the third party had to be “funded” in order to purchase the unitrust remainder interest; (3) Ohle arranged for Brown to be funded through the commissions on the Carpe Diem investments with the Ames family; (4) the funding of Brown through the commissions on the Ames' Carpe Diem investments was therefore essential to the implementation of the HOMER transactions; (5) the implementation of the HOMER transactions was necessary to generate client fees to J & G; and (6) the generation of client fees by J & G was essential to enable Ohle to obtain referral fees. Def. Mem. at 16.
Defendants argue that the “new” documents demonstrate that the third party would purchase the unitrust remainder interest through an unsecured promissory note, not cash. See Ohle Exhibit 4 (draft of promissory note dated October 18, 2001); Ohle Exhibit 5 (draft of promissory note dated November 15, 2001). “Hence, ‘funding’ of Brown was irrelevant to the implementation of the HOMER transactions and there was no link between the commissions on the Carpe Diem investments and the alleged referral fee scheme.” Def. Mem. at 17. According to the defendants, it is immaterial that Brown ultimately purchased the unitrust remainder interest for cash, as the new documents reveal that the original intention was to employ promissory notes. Id. at 18.
The Government, however, convincingly argues that these “new” documents do nothing to undermine the jury's verdict:
The fact that some attorneys at J & G or even Brown himself labored under the belief, at some period of time, that Brown might use promissory notes to purchase the Unitrust interests does not mean that Ohle and Daugerdas did not fully contemplate Brown's use of cash as early as October 2001—prior to Ohle's embezzlement of the Ames money. Indeed, Brown's trial testimony makes plain that, at their meeting in October 2001 in Wilmette, Illinois, Daugerdas asked Brown in the presence of Ohle whether he (Brown) had the funds necessary for carrying out Brown's role as the third party in HOMER. Tr. 600–01. And even before that meeting, Ohle had informed Brown that he (Ohle) would provide Brown with the money needed for Brown's role in HOMER. Tr. 601. That testimony supports the inference that Ohle fully appreciated by October 2001, at least, that he would have to come up with the cash to fund Brown's role. Thus, Ohle's fraudulent taking of the Ames' funds in November 2001 (and the transfer of those funds to Brown in early December) can and should properly be viewed as part of the overarching conspiracy to fund the HOMER transactions.
*7 Gov. Mem. at 8 (footnotes omitted). The Court agrees.
By way of a final example, the Court considers one of the very few documents not included in the pretrial electronic database: Ohle Exhibit 14 to this motion. According to the defendants, Exhibit 14 is a 1099 form that J & G issued to Invested Interest. Def. Mem. at 23. They argue that the existence of this form rebuts the Government's claim that the $920,000 payment from J & G to Invested Interest was also Ohle's income. Id.
There are many problems with this argument. First, the form is blank as to the amount of payment, suggesting that it is a draft. Second, there is no proof that J & G issued the 1099 to Invested Interest or filed it with the IRS, and the Government's search of IRS records has indicated that the 1099 was never issued to the tax identification number listed on the 1099. Gov. Mem. at 12. Third, even if a Form 1099 had been issued to Invested Interest, it does not follow that the fees that were filtered through Invested Interest to Ohle are not Ohle's income. As the Government argues:
Form 1099 reflects payments made, which in a case where a nominee was used might reflect the payment to the nominee, but not necessarily whether such payments are in fact income of someone other than the nominee. The determination whether Ohle employed a corporate nominee to receive income is not dependent on whether the company that paid the income issued a Form 1099 to another person or entity. Stated simply, tax evaders like Ohle use nominees all the time, especially when carrying out a scheme to obtain income by fraudulently representing the entitlement to and ultimate recipient of that income. The determination of who has the obligation to report such income depends on substance (here, who took the money by fraud and enjoyed the benefits of the income) and not form (that is, the name of the entity or person serving as a conduit, who may have received a Form 1099).
Id. at 13. Again, the Court agrees with this reasoning. The Form 1099 does not come close to casting this case in such a different light that it undermines the jury's verdict.
The Court has considered all of the other documents submitted by the defendants, as well as defendants' arguments relating thereto, and it concludes that none of the documents, either singly or in combination, creates a reasonable probability that the result of the case would have been different had they been disclosed to the defense. This conclusion applies with equal force to the documents defendants suggest are relevant to the Fatico hearing. In sum, therefore, none of the documents is “material” under the Brady standard.
Accordingly, the Court concludes that the Government did not violate its Brady obligations, both because it did not suppress evidence and because the documents at issue are not material. It remains to add only that the Court also finds there is no basis whatsoever for defendants' assertion that the Government “knew or should have known” that it was presenting perjured testimony or false evidence. United States v. Wallach, 935 F.2d 445, 456 (2d Cir.1991).[6]With all issues resolved as a matter of law, there is no need for an evidentiary hearing.
*8 For the foregoing reasons, the Court reaffirms its denial of the defendants' motion for a new trial and directs the Clerk of the Court to close item numbers 157, 158, and 159 on the docket of this case. The Clerk of the Court is further directed to close all remaining open items on the docket, including, among others, item numbers 41, 80, 85, 94, and 146.
SO ORDERED.
Footnotes
Following Ohle's conviction, the Government declined to try him on the remaining counts of the Second Superseding Indictment, but argued instead that Ohle's conduct underlying the severed charges constituted “relevant conduct” for purposes of Ohle's sentencing. Following a Fatico hearing on this issue, the Court found the Government had proven Ohle's criminal culpability with respect to the so-called “HOMER” transaction by a preponderance of the evidence. See 10/25/10 Findings and Conclusions Regarding “Relevant Conduct.” In the end, this played little role in the Court's sentence, which, in the case of both defendants, was substantially below the Guidelines range.
See Declaration of Stanley J. Okula, Jr. (dated December 30, 2010) ¶ 8 (“The J & G documents that were produced in discovery to the defendants electronically prior to trial generally were stamped with a Bates number with the prefix ‘JGZ’.”).
See also United States v. Mmahat, 106 F.3d 89, 94 (5th Cir.1997) (“[T]here is no authority for the proposition that the government's Brady obligations require it to point the defense to specific documents within a larger mass of material that it has already turned over.”), overruled in part on other grounds by United States v. Estate of Parsons, 367 F.3d 409 (5th Cir.2004) (en banc); Kutzner v. Cockrell, 303 F.3d 333, 336 (5th Cir.2002) (“When evidence is equally available to both the defense and the prosecution, the defendant must bear the responsibility of failing to conduct a diligent investigation.”). Accord United States v. Ferguson, 478 F.Supp.2d 220, 226 (D.Conn.2007) ( “The government concedes that it did produce a large quantity of documents pursuant to Fed.R.Crim.P. 16, but they were given to the defendants in the exact same electronically searchable format that the government is currently using.”)
The Government notes that the electronic database contained a slightly different version of the second of these documents (the spreadsheet), but the Court finds this small variation immaterial.
The Government explains that the “ ‘swaps' nature of the transaction spreadsheet is made clear not only through the ‘S' that is contained in the second column of the spreadsheet and the names of the J & G clients (all of whom were ‘swaps' participants), but also through the lack of any reference to defendant Bradley, whose false portrayal of himself as a third party service provider in the Ducote family HOMER transactions led to the payment to Bradley of third-party fees.” Gov. Mem. at 6–7.
If the evidence shows that the government “knew or should have known” that it was presenting perjured testimony or false evidence, then the defendant is entitled to a new trial where there is “any reasonable likelihood that the false testimony could have affected the judgment of the jury.” United States v. Wallach, 935 F.2d 445, 456 (2d Cir.1991) (citations omitted). In such cases, the defendant's right to a new trial is “virtually automatic.” United States v. Stewart, 433 F.3d 273, 297 (2d Cir.2006) (citations omitted).