United States v. Bases

549 F.Supp.3d 822

UNITED STATES of America, Plaintiff,

v.Edward BASES and John Pacilio, Defendants.

18 CR 48-1, 2

United States District Court, N.D. Illinois, Eastern Division.

Signed February 24, 2021

AUSA, Assistant US Attorney, United States Attorney's Office, Chicago, IL, Anne W. Stukes, Pro Hac Vice, U.S. Commodity Futures Trading Commission, Avi Perry, Assistant US Attorney, John James Liolos, Scott Armstrong, United States Department of Justice, Criminal Division, Washington, DC, Pretrial Services, Probation Department, for Plaintiff.

Alfred U. Pavlis, Daniel S. Noble, Pro Hac Vice, David Robert Allen, Pro Hac Vice, Michael Q. English, Andrew M. Calamari, Pro Hac Vice, Elias Laris, Pro Hac Vice, Finn Dixon & Herling LLP, Stamford, CT, Gregory Thomas Fouts, Kenneth Michael Kliebard, Morgan, Lewis & Bockius LLP, Chicago, IL, Julie B. Porter, Salvatore Prescott Porter & Porter PLLC, Evanston, IL, for Defendant Edward Bases.

David Harrison McGill, Jonathan David Cogan, Matthew Ivan Menchel, Sean Stephen Buckley, George Stamatopoulos, Pro Hac Vice, Kobre & Kim LLP, New York, NY, Erika Lynn Berman, Pro Hac Vice, Leanne A. Bortner, Pro Hac Vice, Sydney P. Sgambato, Pro Hac Vice, Kobre & Kim LLP, Washington, DC, Gregory Thomas Fouts, Kenneth Michael Kliebard, Morgan, Lewis & Bockius LLP, Chicago, IL, for Defendant John Pacilio.

ORDER

JOHN Z. LEE, United States District Judge

Defendants Edward Bases and John Pacilio move to compel the government to produce any information and materials discoverable under Fed. R. Crim. P. 16 and Brady v. Maryland , 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), that are in the possession of the Commodity Futures Trading Commission ("CFTC") on the grounds that the Department of Justice ("DOJ") and the CFTC had engaged in a joint investigation of Defendants leading to the charges at issue. For the reasons provided below, the motion is granted.

STATEMENT

I. Procedural Background

Defendants previously had requested that the DOJ retain and produce materials in possession of the CFTC as part of the government's obligations under Rule 16 and Brady. In response, the DOJ took the position that it had not engaged in a joint investigation with the CFTC and, therefore, had no obligation to review such materials in the possession of the CFTC or to produce such information as part of its discovery responsibilities.

Rather than filing a motion under Rule 16 and Brady to compel the DOJ to produce the information at issue, Defendants served a Rule 17 subpoena on the CFTC. The CFTC moved to quash the subpoena, and, in response, Defendants argued that the CFTC had engaged in a joint investigation with the DOJ, which required the DOJ to produce any discoverable material that was in the CFTC's possession. However, given that the subpoena was directed at the CFTC, and the primary issue (i.e. , whether the DOJ and CFTC had participated in a joint investigation) was insufficiently addressed in the briefs,¹ the Court invited Defendants to file a motion to compel under Rule 16 and Brady against the DOJ. Defendants did so, and the DOJ and the CFTC oppose.

II. Legal Standards

A. Federal Rule of Criminal Procedure 16

Federal Rule of Criminal Procedure 16 requires the government to allow the defendant "to inspect and to copy or photograph books, papers, documents, data, photographs, tangible objects, buildings or places, or copies or portions of any of these items, if the item is within the government's possession, custody, or control and ... the item is material to preparing the defense." Fed. R. Crim. P. 16(a)(1)(E) ; see also Fed. R. Crim. P. 16(a)(1)(F). "Courts have typically required the prosecution to disclose under Rule 16 documents material to the defense that (1) it has actually reviewed, or (2) are in the possession, custody, or control of a government agency so closely aligned with the prosecution so as to be considered part of the prosecution team." United States v. Finnerty , 411 F. Supp. 2d 428, 432 (S.D.N.Y. 2006) ; see, e.g., United States v. Mullins , No. 12 CR 596, 2013 WL 3506547, at *1 (N.D. Ill. July 11, 2013) (where the FBI conducted a joint investigation with the Cook County Office of the Independent Inspector General ("OIIG"), and the Cook County State's Attorney's Office, the government produced materials from the FBI, OIIG, and State's Attorney investigators). "Certainly the prosecutor would not be allowed to avoid disclosure of evidence by the simple expedient of leaving relevant evidence to repose in the hands of another agency while utilizing his access to it in preparing his case for trial; such evidence is plainly within his Rule 16 ‘control.’ " United States v. Trevino , 556 F.2d 1265, 1272 (5th Cir. 1977).

B. Brady

Under Brady , the government has an affirmative duty to disclose evidence favorable to the defendant. See Kyles v. Whitley , 514 U.S. 419, 432, 115 S.Ct. 1555, 131 L.Ed.2d 490 (1995) ("The prosecution's affirmative duty to disclose evidence favorable to a defendant can trace its origins to early 20th-century strictures against misrepresentation and is of course most prominently associated with th[e Supreme] Court's decision in Brady v. Maryland , 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963)."). In that case, the Supreme Court held that "the suppression by the prosecution of evidence favorable to an accused ... violates due process where the evidence is material either to guilt or to punishment, irrespective of the good faith or bad faith of the prosecution." Brady , 373 U.S. at 87, 83 S.Ct. 1194.

Subsequently, the Supreme Court clarified that the prosecution has a duty under Brady to disclose impeachment evidence. See Giglio v. United States , 405 U.S. 150, 154–55, 92 S.Ct. 763, 31 L.Ed.2d 104 (1972) ; see also United States v. Bagley , 473 U.S. 667, 676, 105 S.Ct. 3375, 87 L.Ed.2d 481 (1985). In addition, prosecutors have an affirmative duty "to learn of any favorable evidence known to the others acting on the government's behalf in [a] case." Strickler v. Greene , 527 U.S. 263, 280–81, 119 S.Ct. 1936, 144 L.Ed.2d 286 (1999) (quoting Kyles , 514 U.S. at 437–38, 115 S.Ct. 1555 ); United States v. Walker , 746 F.3d 300, 306 (7th Cir. 2014) ("The government's duty to disclose favorable evidence extends beyond evidence in its immediate possession to evidence in the possession of other actors assisting the government in its investigation."). As such, "[a] prosecutor's duty to review documents in the possession, custody, or control of another agency arises where the Government conducts a ‘joint investigation’ with another agency." United States v. Collins , 409 F. Supp. 3d 228, 239 (S.D.N.Y. 2019) ; United States v. Rigas , No. 02 Cr. 1236 (LBS), 2008 WL 144824, at *2 (S.D.N.Y. Jan. 15, 2008), aff'd, United States v. Rigas , 583 F.3d 108 (2d Cir. 2009) ; see United States v. Middendorf , No. 18-CR-36 (JPO), 2018 WL 3956494, at *4 (S.D.N.Y. Aug. 17, 2018) ("[W]here the prosecution ‘conducts a joint investigation with another state or federal agency, courts in this Circuit have held that the prosecutor's duty extends to reviewing the materials in the possession of that other agency for Brady evidence.’ " (cleaned up) (quoting United States v. Gupta , 848 F. Supp. 2d 491, 493 (S.D.N.Y. 2012) )).

To determine whether a joint investigation has occurred, courts engage in "a case-by-case analysis of the extent of interaction and cooperation between the two government[al] [agencies]." United States v. Antone , 603 F.2d 566, 570 (5th Cir. 1979) ; Avila v. Quarterman , 560 F.3d 299, 308 (9th Cir. 2009). One main factor to consider is whether there has been cooperation between the investigative agencies. See Antone , 603 F.2d at 570. An example of cooperation is the "coordination in conducting witness interviews and otherwise investigating the facts of the case." United States v. Martoma , 990 F. Supp. 2d 458, 461 (S.D.N.Y. 2014). Another factor is whether the other agency "reviewed documents gathered by or shared documents with the prosecution[.]" Middendorf , 2018 WL 3956494, at *4 (citing United States v. Blaszczak , 308 F. Supp. 3d 736, 741–42 (S.D.N.Y. 2018) ).

III. Analysis

In support of their motion to compel, Defendants argue that the CFTC's participation in the government's investigation obligates the DOJ to search the CFTC's files for information that is material to the preparation of the defense or is exculpatory. In Defendants’ view, the DOJ and CFTC's joint investigation focused on spoofing activities at Deutsche Bank, Bank of America, and Morgan Stanley, and it uncovered facts that led directly to the charges in the indictment.

In making this argument, Defendants primarily rely on Gupta , 848 F. Supp. 2d at 494, and Martoma , 990 F. Supp. 2d at 461. In Gupta , the U.S. Attorney's Office ("USAO") and the Securities and Exchange Commission ("SEC") argued that they had conducted parallel, not joint, investigations, prompting the court to hold that "whether parallel investigations are also ‘joint’ investigations must be evaluated in light of the disclosures being requested, and when it comes to Brady disclosures, the relevant context is one of fact-gathering, not charging determinations or otherwise." 848 F. Supp. 2d at 494. The court explained that "[f]or Brady purposes, it is enough that the agencies are engaged in joint fact-gathering, even if they are making separate investigatory or charging decisions, because the purpose of Brady is to apprise the defendant of exculpatory evidence obtained during the fact-gathering that might not otherwise be available to the defendant." Id. And because the agencies jointly interviewed forty-four witnesses, the court directed the USAO to review the SEC's memoranda relating to those interviews for any additional Brady material and to disclose any such material to the defense. Id. at 495.

In Martoma , the USAO and the SEC jointly conducted and coordinated twenty interviews of twelve witnesses, and the SEC provided the USAO with...