United States v. Blaszczak

308 F.Supp.3d 736

UNITED STATES of America,

v.David BLASZCZAK, et al., Defendants.

S1 17–cr–0357 (LAK)

United States District Court, S.D. New York.

Signed March 29, 2018

Ian McGinley, Joshua A. Naftalis, Brooke E. Cucinella, Assistant United States Attorneys, Robert Khuzami, Acting United States Attorney

David Esseks, Eugene Ingoglia, Allen & Overy, Attorneys for Defendant Robert Olan

MEMORANDUM OPINION

Lewis A. Kaplan, District Judge.

Defendant Robert Olan, one of four defendants in this alleged insider trading case, seeks an order requiring the prosecution to review for Brady material certain information in the possession of the Securities and Exchange Commission ("SEC").

Facts¹

In July 2013, the SEC initiated an informal inquiry into the conduct underlying this case. It opened a formal investigation in November 2013. Between July 2013 and November 2014 it issued around 56 subpoenas and regulatory demands for documents.²

In November 2014, the SEC referred this matter to the United States Attorney's Office ("USAO") for criminal investigation.³ The USAO then started to investigate, and an FBI investigation began in January 2015.⁴

Once the criminal investigation began, the USAO and SEC conducted 39 witness interviews in tandem.⁵ The USAO and SEC representatives told the witnesses who were interviewed simultaneously by both that the agencies' investigations were separate and that the interviews were conducted together only as a matter convenience.⁶ The agencies told each witness also that, if there were to be a proffer agreement, the witness would enter into a separate agreement with each agency.⁷ In addition, the USAO and FBI interviewed or contacted witnesses around 21 times without SEC involvement.⁸ The SEC provided the USAO with all the documents it obtained during its investigation, but the USAO acquired additional documents through grand jury subpoenas that were not shown to the SEC.⁹

At the conclusion of the investigations, the USAO did not ask the SEC, nor the SEC the USAO, to bring particular charges or to sue or charge a particular defendant, although each advised the other of its intentions.¹⁰ The USAO sought and obtained a grand jury indictment¹¹ that charged Olan and others.¹² The Commission, after receiving an action memorandum¹³ from the enforcement staff, authorized and filed a civil enforcement action against all of the defendants in this case except Olan.¹⁴ Its complaint, filed the day after the indictment was unsealed, alleges violations of the securities laws. The indictment charges Olan and his co-defendants with securities fraud, but also with conversion of government property and wire fraud.¹⁵

Olan now moves to compel the USAO to review the SEC's action memorandum and "any similar SEC documents addressing the merits of whether or not to charge Mr. Olan"¹⁶ for Brady material.¹⁷ It must be noted also that the USAO, presumably in an effort to comply with Olan's request, asked to review the action memorandum, but the SEC refused.¹⁸ Instead, the SEC represented to the USAO that its staff relied in preparing its action memorandum only on documents already in the possession of the USAO and witness statements from witnesses made at interviews at which USAO personnel were present.¹⁹ The defendant does not dispute that the government has fulfilled its Brady obligations as to material in its possession, which includes all of the documents relied upon in the SEC action memorandum.²⁰ Given that exculpatory information in the action memorandum would have had its origin in a document used in the memorandum's preparation, and given that the USAO has reviewed all such documents for Brady material, the universe of exculpatory information that theoretically could be contained uniquely in the action memorandum is vanishingly small.

Discussion

Olan's motion rests on a series of foundations, none of which bears the weight placed upon it and which collectively cannot support the edifice he seeks to construct.

The Court's Role Prior to Trial

It often is said that the prosecution is obliged to disclose exculpatory information to a criminal defendant in a timely manner. But the principle, which serves well enough for most purposes when stated in that manner, actually is somewhat more nuanced, as this so-called Brady "obligation" is more limited. The nuance is important here.

Brady is not a rule of criminal procedure or other positive mandate.²¹

Rather, Brady held "that the suppression by the prosecution of evidence favorable to an accused upon request 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."²² And the Supreme Court subsequently has made clear that "suppressed" 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."²³ Thus, the Brady test may be applied only following a conviction, as only then is a court in a position to determine whether disclosure of previously undisclosed information likely would have produced a different outcome. The trial court's role prior to trial, as the Second Circuit made clear in United States v. Coppa,²⁴ therefore is limited.

"In Coppa, the district court concluded, subject to a narrow exception, that ‘the Constitution requires the government to provide a defendant with all exculpatory and impeachment materials immediately upon request by a defendant, even if the request is made far in advance of trial.’ The Second Circuit, however, granted mandamus to overturn this ruling, holding that ‘a Brady violation occurs only where the government suppresses evidence that "could reasonably [have been] taken to put the whole case in such a different light as to undermine confidence in the verdict.’ In doing so, it rejected the view that Brady imposes a duty independent of any prejudice to the accused:

" ‘Although the government's obligations under Brady may be thought of as a constitutional duty arising before or during the trial of a defendant, the scope of the government's constitutional duty—and, concomitantly, the scope of a defendant's constitutional right—is ultimately defined retrospectively, by reference to the likely effect that the suppression of particular evidence had on the outcome of the trial.’

"The fact that there can be no Brady violation in the absence of prejudice is not to say either that the government has no cause for concern, or that a trial court is without power to order disclosure, in advance of trial. The government faces the prospect that too niggardly an approach risks the validity of any conviction and thus ‘should resolve ... doubts [as to the usefulness of evidence to the defense] in favor of full disclosure.’ Moreover, the trial court ‘has wide latitude ... to carry out successfully its mandate to effectuate, as far as possible, the speedy and orderly administration of justice.’ Indeed, the Second Circuit pointedly underscored this point in Coppa when it noted that the ‘case present[ed] no occasion to consider the scope of a district court's discretion to order pretrial disclosures as a matter of sound case management’ and remanded ‘to afford the District Court an opportunity to determine what disclosure order, if any, it deems appropriate as a matter of case management.’ "²⁵

Accordingly, this Court cannot say that the failure of the prosecution to review or turn over all or any part of the SEC's action memorandum, even assuming that the prosecutors had the ability to do so, would breach the prosecution's Brady obligations. It simply is too soon to tell. And while the Court, in an appropriate case, may require pretrial production of perhaps exculpatory materials that are available to the prosecutors, Olan does not invoke that power here as a matter of case management. He has not even attempted to show that sound case management requires production of the SEC's action memorandum.

The Scope of the Brady Obligation

The next premise upon which Olan's argument rests is that the prosecutors' duties under Brady would extend to the SEC action memorandum and any related SEC work product, assuming for the purpose of discussion that it is likely that the material in question contains evidence exculpatory of Olan. He relies on the facts that the SEC furnished documents that it had collected to the USAO, that the SEC and the USAO interviewed a number of witnesses at the same time, and that the SEC and USAO ultimately informed one another of the enforcement actions each intended to take.

Once again, it is useful to begin from first principles. It therefore bears repeating, albeit with different emphasis, that Brady 's holding was "that the suppression by the prosecution of evidence favorable to an accused upon request 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."²⁶ Thus, the Brady doctrine is directed, first and foremost, at suppression of evidence by prosecutors although, to be sure, it is not—and could not properly be—so rigorously cabined. It extends to anyone who is an "arm of the prosecutor."²⁷

Many cases deal with whether particular individuals have acted as "arms of the prosecutor" in given cases. Thus, for example, a government agent who "participated actively in [an] investigation," "was present at counsel's table throughout all or most of the trial," and "indicat[ed] that he was intimately involved in the prosecution" was held to have acted as an arm of the prosecutor.²⁸ But a parole officer did not.²⁹ Nor did a cooperating witness or informant who provided information and testified at trial, but who "played no role in the investigation or in determining investigation or trial strategy."³⁰ Even a government expert who assisted prosecutors in developing cross-examination questions and participated in mock cross examinations was held not to have acted...