Free Response to Motion - District Court of Arizona - Arizona

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PAUL K. CHARLTON United States Attorney District of Arizona RACHEL C. HERNANDEZ Arizona State Bar No. 016543 GARY M. RESTAINO Arizona State Bar No. 017450 Assistant U.S. Attorneys Two Renaissance Square 40 N. Central Avenue, Suite 1200 Phoenix, Arizona 85004-4408 Telephone (602) 514-7500 [email protected] [email protected]

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA United States of America, Plaintiff, v. Richard Nail, Defendant. UNITED STATES' RESPONSE TO DEFENDANT NAIL'S MOTION TO SEVER CR04-0820-005-PHX-FJM

The United States, through counsel undersigned, responds in opposition to defendant Nail's 17 Motion to Sever. Nail was a manager in the telemarketing operations charged in the indictment. 18 He helped develop the fraudulent scheme, laundered assets through the scheme, and overstated 19 his income and earnings from the scheme. All charges against him are properly joined, and 20 21 A. 22 Defendant Nail and his co-defendants operated telemarketing boiler rooms in Arizona, in 23 which co-defendant Harvey Sloniker and his companies pitched a scam presentation for a major 24 credit card to consumers with deficient credit, arranged with a third party processor to debit 25 consumers' accounts, received wire transfers from the third party processor, laundered the 26 27
1 Nail also joins the motions filed by his co-defendants, and the government incorporates 28 by reference its responses to those motions.

defendant has articulated no prejudice from this joinder.1 Background

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1 money and ultimately failed to provide consumers with the benefit of the bargain they believed 2 they had made. (Indictment at ¶¶ 12-25.) He and other co-defendants also arranged to obtain 3 credit through the use of overstated income figures from the scheme (Indictment at ¶ 45). All 4 charges against Nail are joined in the same indictment. 5 B. 6 Argument All charges against Nail are properly joined, under the broad standards of Fed. R. Crim.

7 P. 8(a). Defendant has failed to articulate any prejudice under Fed. R. Crim. P. 14, as 8 defendants charged together are generally tried together, and associates in a telemarketing 9 operation are no exception to this general rule. This Court should deny defendant's motion. 10 11 1. The government properly joined all charges against Nail

In seeking a misjoinder ruling, Nail focuses his analysis on the nature of the claims rather

12 than the number of defendants (Def. Motion at 3:1-5), but he bases his legal argument for 13 misjoinder on the wrong provision of the Federal Rules of Criminal Procedure. When a 14 defendant charged in all counts of the indictment alleges misjoinder based on the nature of the 15 joined charges, the proper rule to apply is Fed. R. Crim. P. 8(a),2 and the right to join multiple 16 charges is more expansive than the right to join multiple defendants. United States v. Sanchez17 Lopez, 879 F.2d 541, 550 (9th Cir. 1989). The government may join multiple charges if the 18 offenses "are of the same or similar character, or are based on the same act or transaction, or are 19 connected with or constitute parts of a common scheme or plan." Fed. R. Crim. P. 8(a). Nail 20 displayed a similar character for fraud in all of the alleged acts. 21 The underlying allegations of telemarketing and money laundering form the basis for

22 counts 1-49. The loan fraud charges in counts 50-69 are of a similar character. Defendant used 23 his income from the underlying fraud to acquire the loans at issue in the loan fraud counts. This 24 fraud flows from the telemarketing fraud, and the purchase of homes and home equity helps 25 clean the telemarketing earnings. Cf. United States v. Whitworth, 856 F.2d 1268, 1277 (9th Cir. 26 Joinder with other defendants who are not charged in all counts is also proper under 27 Fed. R. Crim. P. 8(b). (See generally Gov. Resp. to Def. Desiderio's Mot. to Sever.) 28
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1 1988) (failure to pay over taxes on illegal income is properly joined with the allegations that give 2 rise to the illegal income) ; United States v. Roselli, 432 F.2d 879, 899 (9th Cir. 1970) (same). 3 4 2. Nail has not shown that a joint trial would be prejudicial

The burden rests squarely with defendant to establish prejudice. Defendants indicted

5 together are generally tried together. "There is a preference in the federal system for joint trials 6 of defendants who are indicted together .... [Joint trials] promote efficiency and serve the 7 interests of justice by avoiding the scandal and inequity of inconsistent verdicts." Zafiro v. 8 United States, 506 U.S. 534, 537 (1993) (internal citations omitted). 9 Absent prejudice to a party ­ i.e., a "serious risk that a joint trial would compromise a

10 specific trial right of one of the defendants, or prevent the jury from making a reliable judgment 11 about guilt or innocence" ­ a court need not provide any relief under Fed. R. Crim. P. 14. Id. 12 at 539. Defendant's main contention is that he is likely to have a mutually antagonistic defense 13 as to other defendants, although defendant fails to articulate the nature of that defense. It is 14 difficult to sever based on putative antagonistic defenses. United States v. Johnson, 297 F.3d 15 845, 858 (9th Cir. 2002). In the telemarketing context, the Ninth Circuit has upheld joinder 16 even where different groupings within the operation tried to deflect blame onto each other. Id. 17 at 859. A court should only consider a severance based on prejudice if the "core" defenses are 18 completely unreconcilable. United States v. Hanley, 190 F.3d 1017, 1028 (9th Cir. 1999) (in 19 the context of a telemarketing case). No such contention appears plausible here. 20 The Court may mitigate the risk of prejudice through various methods. It may, for

21 example, use limiting instructions throughout and at the close of the trial to compartmentalize 22 the evidence only as to those against whom it is admitted.3 E.g. Johnson, 297 F.3d at 859; 23 Hanley, 190 F.3d 24 Nail in particular claims that the possible use under Rule 404(b) by the government of 25 uncharged acts of Harvey Sloniker, such as his violation of a consent decree, would prejudice Nail. (Def. Mot. at 3:18-21.) As a preliminary matter, this, too, may be compartmentalized. To 26 the extent that defendant still perceives that it would be prejudicial, the appropriate response to a Rule 404(b) issue is a motion in limine at a time closer to trial and/or an objection to the 27 introduction of the evidence at trial, as based on Fed. R. Evid. 403. 28
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1 at 1027. Post-conspiracy confessions may be redacted to cure any Bruton problems. Richardson 2 v. Marsh, 481 U.S. 200, 210-11 (1987). With these mitigation efforts, defendant's putative 3 prejudice argument is outweighed by the judicial economy inherent in a joint trial: 4 5 6 7 United States v. Kennedy, 564 F.2d 1329, 1334 (9th Cir. 1977). To the extent this Court finds 8 any prejudice in a joint trial, it should use the mitigation measures in the above cases to 9 ameliorate the prejudice in a joint trial of all participants. 10 C. 11 The charges against Nail are properly joined under Fed. R. Crim. P. 8(a), and defendant 12 has not met his burden to establish prejudice under Fed. R. Crim. P. 14(a), particularly where, 13 as here, defendant is named in every count of the indictment and led and organized the unlawful 14 scheme. 15 compartmentalization and, if necessary, Bruton redactions. For the foregoing reasons, this Court 16 should deny defendant's motion. 17 Respectfully submitted this 14th day of October, 2005. 18 19 20 s/ Gary M. Restaino 21 22 23 24 CERTIFICATE OF SERVICE 25 I hereby certify that on this date, I electronically transmitted the attached document to the 26 Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Bruce Blumberg, Jeanette Alvarado, Ivan Mathew, 27 Tom Hoidal, Greg Parzych and Michael Bresnehan. 28
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It is not surprising that a defendant might prefer to be tried separately so that only evidence admissible strictly against him would be heard by the jury. However, if this formed the only basis for prejudice required for severance, the consequent volume of separate trials of multiple actions in a series of similar and connected illegal transactions would create an intolerable burden on the trial courts.

Conclusion

Furthermore,

any prejudice to the joinder may be overcome through

PAUL K. CHARLTON United States Attorney District of Arizona

RACHEL C. HERNANDEZ GARY M. RESTAINO Assistant U.S. Attorney

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