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. Kindy Jonagan, Defendant. UNITED STATES' RESPONSE TO DEFENDANT JONAGAN'S MOTION TO SEVER CR04-0820-003-PHX-FJM

The United States, through counsel undersigned, responds in opposition to defendant 17 Jonagan's Motion to Sever. The loan fraud charges against other co-defendants, based on an 18 overstatement of income gained from unlawful activities, are logically connected to the 19 underlying telemarketing and money laundering activities, and defendant participated in those 20 underlying transactions through her role in the telemarketing scheme. The overt actions in 21 support of the loan fraud conspiracy were committed by two of the charged conspirators in the 22 telemarketing activities. As articulated more fully below in the Memorandum, defendant Jonagan 23 is properly joined to the indictment, and she has failed to articulate a basis for relief from this 24 logical joinder. 25 A. 26 This case involves a large telemarketing scheme, mail and wire fraud and money laundering 27 charges arising out of the scheme, loan fraud charges based on the overstatement of income from 28 Background

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1 the scheme and the failure to pay over withholding taxes on behalf of telemarketing sales 2 representatives who worked for the scheme. Defendant is directly charged in Counts 1-49 (the 3 underlying telemarketing, mail/wire fraud and money laundering activities) through her role as 4 the human resources and customer service manager of the operation. (Indictment at ¶ 3.) As 5 part of her activities she directly engaged in overt acts towards the promotion of the conspiracy 6 (see, e.g. Indictment at ¶ 26a ,26g) and engaged in dissuasive actions to prevent complaining 7 customers from actually registering their complaints. (Indictment ¶ 25.) 8 B. 9 10 Argument 1. The government properly joined Jonagan to the indictment

Fed. R. Crim. P. 8(b) does not require that the government charge defendant with the

11 entire plan or scheme. Rather, the Rule focuses on defendant's participation in a series of acts 12 or transactions, wholly apart from whether a defendant is charged with the unlawful conduct: 13 14 15 Fed. R. Crim. P. 8(b). Rule 8(b) "should be construed broadly in favor of initial joinder". 16 United States v. Golb, 69 F.3d 1417, 1425 (9th Cir. 1995). Based on the facts of this case, the 17 expansive role of defendant as an in-house accountant and the central allegation of money 18 laundering, defendant Jonagan is properly joined to the indictment with the other defendants in 19 this case. 20 The term "transaction" is "a word of flexible meaning", and the Court should look to the 21 nature of any common activity and other logical relationships in determining whether a 22 defendant is properly joined. United States v. Satterfield, 548 F.2d 1341, 1344 (9th Cir. 1977). 23 The common activity in the instant case is a complex financial fraud scheme rather than a 24 discrete event or a grouping of discrete events, and it is precisely that complexity and the 25 relationships among the defendants that distinguishes the instant case from those cited by 26 defendant. In Satterfield, for example, the court found misjoinder where two defendants 27 28
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The indictment or information may charge 2 or more defendants if they are alleged to have participated in the same act or transaction, or in the same series of acts or transactions, constituting an offense or offenses. . . . All defendants need not be charged in each count.

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1 participated together in two robberies during one summer, and the first defendant engaged in 2 three other robberies on his own. Each robbery was charged separately, rather than as part of 3 a conspiracy, and the five robberies were not indicative of a common pattern. Id. at 1346. The 4 opinion notes no extensive planning among the defendants. In marked contrast, the instant case 5 involves several conspiracies: Jonagan is charged in one such conspiracy directly, and her 6 customer service role helped perpetuate the fraud, which enabled co-defendants to overstate their 7 income through the loan fraud counts. The various defendants engaged in the activities over a 8 prolonged period of time, with a level of sophistication greater than a mask and gun bank 9 robbery, and joinder recognizes the role of multiple participants within the overall scheme. 10 See Satterfield, 548 F.2d at 1345 (contrasting the bank robberies with a case of permissible 11 joinder, that is, a scheme carried out in an intricate manner). 12 The loan fraud charges against co-defendants Harvey Sloniker and Richard Nail arise

13 directly out of income earned from repeated and methodical mail and wire fraud, and the loans 14 assisted in the laundering of that income by enabling the two co-defendants to purchase equity 15 in a legitimate product (and, perhaps, more equity than they should have been able to purchase) 16 with the unlawful proceeds. The government contends that Jonagan's actions in the original 17 conspiracy amount to participation in a series of acts and transactions as required under the Rule. 18 "Whether a series exists depends on whether there is a logical relationship between the 19 transactions." Golb, 69 F.3d at 1425 (internal citations omitted). Defendant cites to an example 20 of an illogical relationship that fails to meet the joinder requirement, namely the inclusion of an 21 unrelated and isolated incident of extortion within a larger conspiracy to traffic in stolen cars. 22 See United States v. Sarkisian, 197 F.3d 966, 976 (9th Cir. 1999). Other than the participation 23 of some of the trafficking defendants, the extortion count in Sarkisian had no relationship to the 24 trafficking counts, and the putative debt did not arise out of the trafficking business but rather 25 from side dealings between one defendant and his brother-in-law. In marked contrast, co26 defendants in the instant case used their income from the underlying fraud to acquire the loans 27 at issue in the loan fraud counts. The loan fraud "flows" from the telemarketing fraud, see 28
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1 Sarkisian, 197 F.3d at 976, and the purchase of homes and home equity helps clean the 2 telemarketing earnings. 3 Moreover, the loan fraud and telemarketing fraud charges encompass similar time periods

4 and a common cast of characters, and Jonagan's customer support role helped keep the 5 underlying operation viable by erecting barriers to customer complaints. This viability provides 6 the logical nexus between the counts. E.g. United States v. Sanchez-Lopez, 879 F.2d 541, 551 7 (9th Cir. 1989) (holding that drug smuggling counts were properly joined with alien smuggling 8 counts as part of an overall scheme to smuggle aliens and drugs and allow the aliens to support 9 themselves through drug activity); Golb, 69 F.3d at 1426 (holding that earlier drug trafficking 10 counts against one defendant were logically related to subsequent charges that both defendants 11 laundered drug money through airplane sales). 12 13 2. Jonagan has not shown that a joint trial would be prejudicial

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

14 together are generally tried together. "There is a preference in the federal system for joint trials 15 of defendants who are indicted together .... [Joint trials] promote efficiency and serve the 16 interests of justice by avoiding the scandal and inequity of inconsistent verdicts." Zafiro v. 17 United States, 506 U.S. 534, 537 (1993) (internal citations omitted). 18 Absent prejudice to a party ­ i.e., a "serious risk that a joint trial would compromise a

19 specific trial right of one of the defendants, or prevent the jury from making a reliable judgment 20 about guilt or innocence" ­ a court need not provide any relief under Fed. R. Crim. P. 14. Id. 21 at 539. Defendants who occupy different roles and are charged in different counts may still be 22 joined, notwithstanding "spillover effects" from the introduction of evidence against other 23 defendants. United States v. Hanley, 190 F.3d 1017, 1027 (9th Cir. 1999) (finding no prejudice 24 where sales representative was tried with owners and officers of a telemarketing scheme). 25 Effective cross-examination can educate the jury rather than confuse them, and defense counsel 26 will be free to elicit testimony that defendant's participation in the underlying operations did not 27 extend to overstating her own income. 28
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The Court may mitigate the risk of prejudice through various methods. It may, for

2 example, use limiting instructions throughout and at the close of the trial to compartmentalize 3 the evidence only as to those against whom it is admitted. E.g. United States v. Johnson, 297 4 F.3d 845, 859 (9th Cir. 2002) (finding no prejudice in the joinder of different job groupings 5 within a telemarketing sales operation); Hanley, 190 F.3d at 1027; Sarkisian, 197 F.3d at 977 6 (holding misjoinder to be harmless error based on the curative powers of the limiting 1 7 instructions). Post-conspiracy confessions may be redacted to cure any Bruton problems. 8 Richardson v. Marsh, 481 U.S. 200, 210-11 (1987). With these mitigation efforts, defendant's 9 putative confusion argument is outweighed by the judicial economy inherent in a joint trial: 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Defendant claims that a Bruton problem exists, but cites no specifics, and claims that she can cite to no specifics because she has not received all witness statements. Defendant omits the fact that she has already been provided with a substantial number of employee statements, and further omits the fact that the scheduling order does not require the government to name all witnesses at this time. The government has provided extensive early discovery, including statements of defendants and potential witnesses. (See generally Resp. to Def. Desiderio's Mot. for Brady Material.) Some additional statements may be disclosed as the government names its employee/victim witnesses, but those statements also may be redacted consistent with Bruton. The government stands ready to provide any and all statements to the Court for in camera review, but such a review would not appear in the interests of judicial economy without some glimmer of defendant's contentions with respect to those statements.
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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. United States v. Kennedy, 564 F.2d 1329, 1334 (9th Cir. 1977). To the extent this Court finds any prejudice in a joint trial, it should use the mitigation measures in the above cases to ameliorate the prejudice in a joint trial of all participants. C. Conclusion Defendant Jonagan is logically joined to the indictment under Fed. R. Crim. P. 8(b), and defendant has not met her burden to establish prejudice under Fed. R. Crim. P. 14(a). Furthermore, any prejudice to the joinder may be overcome through compartmentalization and,

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1 if necessary, Bruton redactions. For the foregoing reasons, this Court should deny defendant's 2 motion. 3 4 5 6 7 8 9 10 11 12 13 CERTIFICATE OF SERVICE I hereby certify that on this date, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic 14 Filing to the following CM/ECF registrants: Bruce Blumberg, Jeanette Alvarado, Ivan Mathew, Tom Hoidal, Greg Parzych and Michael Bresnehan. 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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Respectfully submitted this 14th day of October, 2005. PAUL K. CHARLTON United States Attorney District of Arizona s/ Gary M. Restaino RACHEL C. HERNANDEZ GARY M. RESTAINO Assistant U.S. Attorney

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