MICHAEL H. SIMON, District Judge.
Defendants Dan Heine ("Heine") and Diana Yates ("Yates") are charged in this criminal action with conspiring to commit bank fraud and making false bank entries, reports, or transactions during the time when they were the two most senior officers of The Bank of Oswego (the "Bank"). Before the Court are the parties' motions in limine and other pretrial objections and motions.
Heine and Yates co-founded the Bank in 2004. Until August 2016, the Bank had been a financial institution engaged in the business of personal and commercial banking and lending, headquartered in Lake Oswego, Oregon.
On June 24, 2015, a federal grand jury indicted Heine and Yates for conduct related to their time with the Bank. On March 9, 2017, a federal grand jury returned a Superseding Indictment (the "Indictment"), which charges Heine and Yates with one count of conspiring to commit bank fraud, in violation of 18 U.S.C. § 1349, and 18 counts of making false bank entries, reports, or transactions, in violation of 18 U.S.C. §§ 2 and 1005.
The Indictment against Heine and Yates alleges the following schemes that purportedly advanced the alleged conspiracy's purpose of falsely creating a healthier appearance of the Bank's finances than actually existed:
ECF 623 at 4-11, ¶¶ 13-26. The Indictment further alleges that Heine and Yates knowingly made, or aided and abetted the making of, 18 false entries in the books, reports, and statements of the Bank with the intent to injure and defraud the Bank and to deceive any officer of the Bank, the FDIC, any agent or examiner appointed to examine the affairs of the Bank, and the Bank's Board. Heine and Yates allegedly did so by omitting material information about the true status and condition of the Bank's loans and assets. Id. at 12-13.
The Indictment also names Geoffrey Walsh ("Walsh") as a person who played a role in the alleged conspiracy. Joining the Bank in January 2009, Walsh was the Bank's Senior Vice President of Lending. Id. at ¶ 13. On May 2, 2012, the Bank, acting through Heine, terminated the employment of Walsh, in part based on Walsh's alleged misconduct concerning lending practices. On June 11, 2012, Heine called the Federal Bureau of Investigation ("FBI") to report alleged criminal activity by Walsh. In July 2013, a federal grand jury indicted Walsh in a separate case for conspiracy to commit wire fraud, wire fraud, and conspiracy to make false entries in bank records, among other charges. United States v. Walsh, Case No. 3:13-cr-00332-SI-1 (D. Or.) ("Walsh Criminal Action"). On July 22, 2015, Walsh pleaded guilty to certain charges. In his plea agreement, Walsh accepted responsibility for his role in many of the same acts alleged in the Indictment against Heine and Yates. Walsh is awaiting sentencing.
GRANTED.
The Government moves to preclude testimony or argument that may confuse the jury regarding the legal definition of "materiality" relevant to the charges at issue. The Government does not dispute that the definition of "materiality" may be different in the context of either Generally Accepted Accounting Principles ("GAAP") or the Bank's Call Reports, but the Government requests an appropriate limiting instruction be given to reduce jury confusion when such testimony is presented.
The Court currently intends to instruct the jury both in preliminary and final jury instructions approximately as follows:
See United States v. Lindsey, 850 F.3d 1009, 1014-16 (9th Cir. 2017); United States v. Woods, 335 F.3d 993, 997-998, 1000 (9th Cir. 2003) (holding that omissions of material fact may be used to establish a scheme to defraud); Neder v. United States, 527 U.S. 1, 25 (1999) ("[T]he government does not have to prove actual reliance upon the defendant's misrepresentations" to show materiality.) (citation omitted). Finally, although the Court will not preclude a party from discussing materiality in the context of GAAP or Call Reports, when relevant, the Court may give a limiting instruction upon request and if appropriate.
DEFERRED UNTIL TRIAL, WITH LIMITATIONS.
The Government argues that defendants may attempt to elicit their own self-serving statements through the testimony of other witnesses and that such statements are inadmissible hearsay. The Government moves to preclude a defendant from presenting self-serving hearsay that the Government cannot cross-examine. The Government observes that a defendant may attempt to introduce his or her own statements under Fed. R. Evid. 106 (the Rule of Completeness), Fed. R. Evid. 801(d)(1)(B) (prior consistent statement), Fed. R. Evid. 803(3) (then-existing state of mind or emotion), or on some other basis, including an "opened door" rationale.
The Court defers ruling until trial on the admissibility of any particular purported self-serving statement. No party, however, may attempt to elicit in the presence of the jury any self-serving statement of that party without prior leave of court. Any party seeking to elicit any such statement must first inform the Court, and the matter will be heard outside the presence of the jury. In addition, the Court will enforce the limitation contained in the hearsay exception of Fed. R. Evid. 803(3) (statements of the declarant's then-existing state of mind), which excludes "a statement of memory or belief to prove the fact remembered or believed."
GRANTED. The parties are in agreement.
GRANTED IN PART; DENIED IN PART; WITH LIMITATIONS.
If Defendant Yates elects to testify, she may, if truthful, present testimony that part of the reason she felt "overworked" was due to having to "clean up" after certain statements that Defendant Heine made to certain Bank employees that were unrelated to Bank business. She also may, if truthful, present testimony explaining that this is part of why she resigned and why she decided to speak with the Board and the FBI. She also may, if truthful, present testimony explaining that this is what she meant when she told the FBI that she was tired of "covering up" for Defendant Heine. Yates, however, may not describe any of the specific instances or details of what Defendant Heine allegedly said to any of these Bank employees. The probative value of any such specific statements or details is substantially outweighed by the danger of unfair prejudice. Fed. R. Evid. 403.
TENTATIVELY GRANTED; BEFORE MAKING A FINAL RULING, HOWEVER, THE COURT MAY REVIEW THE VIDEO AT ISSUE, IF TIMELY REQUESTED BY A DEFENDANT.
The evidence at issue in the Government's motion in limine does not appear to be relevant. It does not show Mr. Walsh's character for truthfulness, nor does it show bias on his part. To the extent that this evidence is offered as character evidence, it is precluded under Fed. R. Evid. 404(a), (b)(1). See ECF 858 at 19. Finally, any probative value that this evidence might have is substantially outweighed by the danger of unfair prejudice and thus is properly excluded under Fed. R. Evid. 403. Upon timely request by a Defendant, the Court will review the video at issue and allow Heine to seek reconsideration of this ruling after the Court's review.
GRANTED IN PART; DENIED IN PART.
Pursuant to Fed. R. Evid. 608(b)(1), a defendant may cross-examine a witness regarding specific instances of conduct that are probative of the character of the witness for truthfulness, but extrinsic evidence is not admissible. Thus, a defendant may cross-examine this witness about anything that this witness may have done or not done that is probative of truthfulness, but there shall be no inquiry of this witness regarding any allegations asserted, findings made, or actions taken by any regulatory body regarding this witness. See ECF 858 at 2-17.
GRANTED.
The Government requests that it be permitted to have both FBI Special Agent Mathew Swansinger and FBI Forensic Accountant Glenese Klein present in the courtroom and seated at the Government's counsel table throughout the trial, including both before and after they testify. That request is granted. Fed. R. Evid. 615(b) allows an employee of a non-natural party designated as the party's representative to be present throughout trial, notwithstanding the exclusion of witnesses. Special Agent Swansinger has been designated as the case agent and representative of the United States in this matter.
Fed. R. Evid. 615(c) also permits a person whose presence a party shows to be essential to presenting the party's claim or defense to remain in court throughout trial, notwithstanding the exclusion of witnesses. This rule is most often used to allow a party's expert witness to listen to an opposing party's expert witness and to assist in advising the first party's counsel in crossexamining the opposing expert. In this case, Forensic Accountant Klein will not be testifying as an expert witness. She will only to provide summaries of voluminous records and sufficient background information to make those summaries intelligible. Nevertheless, the Court is satisfied with the Government's representation that Klein's accounting expertise and knowledge of the voluminous records in this case makes her presence essential to the Government within the meaning of Rule 615(c). In addition, because Klein's testimony is limited to summarizing voluminous records and providing related background information, there is minimal risk that she will improperly alter her testimony based on hearing what other witnesses at trial have said before she testifies.
DENIED, WITH CLARIFICATION.
The Government seeks a pretrial ruling on the admissibility of numerous exhibits, largely based on the fact that they were produced by The Bank of Oswego. To the extent that the parties do not stipulate that these documents came from the files of The Bank of Oswego, the Government must produce evidence to that effect sufficient to establish authenticity under Fed. R. Evid. 901. It does not appear, however, that the parties intend to dispute authenticity.
Instead, the primary dispute appears to revolve around whether the Government's exhibits satisfy the hearsay exception for business records under Fed. R. Evid. 803(6). That rule requires, for each exhibit, evidence establishing the following three foundational points: (a) the record was made at or near the time by, or from information transmitted by, someone with knowledge; (b) the record was kept in the course of a regularly conducted activity of a business; and (c) making the record was a regular practice of that business. Id. The Court does not expect that, with an appropriate witness or witnesses, or as otherwise permitted under the Federal Rules of Evidence, it will be particularly difficult for the Government to prove this for all or most of the documents produced by the Bank, but that expectation does not allow the Court to disregard the requirements of Rule 803(6) when an objection to foundation has been timely made.
The Government also requests that the Court clarify the standard for finding an email to be a business record under Rule 803(6). The Government urges the Court to follow the standard described in In re Oil Spill by the Oil Rig DEEPWATER HORIZON in the Gulf of Mexico, on April 20, 2010, MDL No. 2179, 2012 WL 85447 (E.D. La. Jan. 11, 2012). In that case, the court held:
Id. at *3. The Court will follow this standard for applying Rule 803(6) to emails.
GRANTED IN PART AND DEFERRED IN PART UNTIL TRIAL.
The Government moves to "exclude references to the results of the FDIC civil examination and investigation," as well as "various internal correspondence within the FDIC," although the Government "does not dispute that aspects of the FDIC civil examination may be admissible at trial." ECF 670 at 17, 19. The Court will wait until trial to rule on objections to specific questions or exhibits. For the benefit of the parties, however, the Court addresses in this Order two issues raised in this portion of the Government's motion in limine.
First, Yates seeks to present evidence of purported "investigatory bias" by the FDIC, the prosecution team, or both. The Court has already addressed and rejected this argument, after a multi-day evidentiary hearing, in the context of Yates's motion to suppress. See ECF 514. The Court also rejected this argument when Yates raised it again in her Motion to Dismiss or, in the Alternative, for a Jury Instruction Based on Government Misconduct. See ECF 725 (denying ECF 574). Yates will not be allowed to present to the jury evidence or argument of any purported investigatory bias by the FDIC, the prosecution team, or both. There is no relevance to that evidence or argument for the charges that will be considered by the jury. Further, whatever minimal relevance might exist, if any, is substantially outweighed by the risk of confusing the issues, misleading the jury, and wasting time. Fed. R. Evid. 403. A defendant's right to present a complete defense, Chambers v. Mississippi, 410 U.S. 284, 302 (1973), does not override these considerations, which are made after a careful review of the proffered evidence.
Second, Heine seeks to present evidence "that FDIC personnel investigated the very transactions at issue over the course of two years, applied FDIC rules, and concluded by issuing sanctions against Ms. Yates but not Mr. Heine." ECF 857 at 23. Heine argues that this is "powerful impeachment material for the various FDIC witnesses, several of whom were personally involved in the FDIC deliberations." Id. The Government objects, arguing:
ECF 880 at 16. The Court agrees with the Government. Whatever minimal relevance might exist, if any, regarding the FDIC's decision to seek sanctions against Yates but not Heine is substantially outweighed by the risk of confusing the issues, misleading the jury, and wasting time. This evidence and any related argument is excluded under Fed. R. Evid. 403.
GRANTED.
The Government states that it has asked defendants on numerous occasions for reciprocal discovery required under Fed. R. Crim. P. 16(b), but to date "defendants have not provided a single document to the government in discovery." ECF 670 at 19. Thus, the Government requests that the Court exclude from trial any document that defendants failed to disclose in discovery. Rule 16(b)(1)(A) provides:
Fed. R. Crim. P. 16(b)(1)(A).
In his response, Heine states that he has provided to the Government his exhibit list for those exhibits that will be part of Heine's case-in-chief at trial. Heine adds that concurrent with his response, he is sending additional documents to the Government and Yates. ECF 857 at 24-25. In her response, Yates also asserts that she has fulfilled her reciprocal disclosure obligations through her proposed exhibit list. She adds that impeachment evidence need not be disclosed because it is not part of a party's case-in-chief. ECF 846 at 31.
The Court accepts the positions of the Government, Heine, and Yates. Only those documents disclosed in advance of trial may be used by a party in its case-in-chief. This ruling does not apply to the Government's rebuttal case, nor does it apply to any party's impeachment evidence. By "impeachment evidence," the Court refers to evidence (whether an exhibit or live or deposition witness testimony) that is offered to impeach the credibility of a witness. Impeachment of a witness's credibility may occur by showing bias or prejudice, a prior inconsistent statement, a lack of testimonial capacity (e.g., issues of perception, recall, or communication), a witness's character for untruthfulness, or evidence of a criminal conviction, all as provided for under the Federal Rules of Evidence. Evidence that is offered primarily to prove or disprove an element of a claim or defense is not evidence that is offered to impeach the credibility of a witness and thus is not impeachment evidence; it must be disclosed in accordance with Rule 16.
DEFERRED UNTIL TRIAL.
The Government argues that proving a scheme to defraud "demands neither a showing of ultimate financial loss nor a showing of intent to cause a financial loss." Shaw v. United States, 137 S.Ct. 462, 467 (2016). The Court agrees and will so instruct the jury. See generally United States v. Benny, 786 F.2d 1410, 1417 (9th Cir. 1986) ("While an honest, good-faith belief in the truth of the misrepresentations may negate intent to defraud, a good-faith belief that the victim will be repaid and will sustain no loss is no defense at all.").
The Government also argues that if defendants are permitted to introduce evidence of the effect on the value of the Bank in an effort to prove their lack of intent to deceive or a lack of materiality, the Government should be allowed to present evidence of the actual consequences of the defendants' conduct in this case. See United States v. Beltran-Rios, 878 F.2d 1208, 1212 (9th Cir. 1989) (noting that otherwise excludable evidence is admissible when a defendant "opens the door" through potentially misleading testimony). Thus, the Government argues, if an expert witness for a defendant is allowed to testify that the misstatements did not have an "effect on the value of the Bank of Oswego to potential purchasers or investors," ECF 516 at 12, then, the Government should be able to question the expert on factual matters concerning the decrease in value of the Bank after the misstatements were uncovered. The Government adds that it should then also be able to present factual evidence in rebuttal concerning the sales price of the Bank and testimony from shareholders about the value of their stock holdings both before and after the misstatements at issue were discovered by regulators and the public. The Court generally agrees with the Government, but will wait to hear the proferred evidence in context.
DENIED.
Heine moves to exclude, as irrelevant and unfairly prejudicial, evidence relating to his loan-collection efforts from customers who are not referred to in the Indictment. This evidence, however, is relevant to show intent, knowledge, participation, and motive. The Government represents that its evidence will show Heine's knowledge and motive in submitting "clean" reports to the FDIC, his personal involvement in the A Avenue transaction, and the fact that his involvement in the A Avenue transaction was neither unusual nor an "outlier" for him. This ruling is without prejudice to any party's right at trial to object to any specific question or exhibit.
DEFERRED UNTIL TRIAL.
Heine moves to exclude improper lay opinion testimony or documents concerning his knowledge or state of mind. Heine offers as examples FBI 302 statements and FDIC Memoranda of Interviews ("MOIs") reciting a witness's speculation or opinions about what Heine thought, must have known, or believed. These objections are best made at trial in the context of a specific question, answer, or exhibit. The Court will follow the requirements of Fed. R. Evid. 602 (requiring personal knowledge by a witness, except in situations involving expert testimony). Further, the rule permitting lay opinion, Fed. R. Evid. 701, does not permit a witness to speculate about the contents of another person's knowledge, although testimony such as "he had a surprised (or angry) (or disappointed) look of his face" or "he did not have a surprised (or angry) (or disappointed) look on his face" are not necessarily objectionable if there is a sufficient foundation for such lay opinion. See generally United States v. Skeet, 665 F.2d 983, 985 (9th Cir. 1982) (discussing parameters for admissibility of lay opinion testimony).
DEFERRED UNTIL TRIAL.
Heine moves to exclude lay opinion testimony by FBI Forensic Account Glenese Klein and other Government witnesses. Heine also objects to allowing Klein to express her views on contested interpretations of Bank documents during the course of her testimony summarizing voluminous records. Heine further asks the Court to be "vigilant" on this issue during the testimony of Government witnesses Lawler, Gordon, and Menchau. The Government responds that Klein's testimony will be "classic summary testimony of an agent" and is proper under Fed. R. Evid. 1006. The Government adds that by the time of Klein's testimony, the admissibility of the underlying documents will have been shown. The Government also argues that witnesses Lawler, Gordon, Menchau, Wallace, and Kovalski will testify in accordance with the Federal Rules of Evidence, including the lay opinion rule in Fed. R. Evid. 701. The Court will rule on any specific objections, if timely raised at trial.
DEFERRED UNTIL TRIAL.
Rule 801(d) of the Federal Rules of Evidence excludes from the definition of "hearsay" certain types of out-of-court statements. One such exclusion is for statements made by a defendant's "coconspirator during and in furtherance of the conspiracy." Fed. R. Evid. 801(d)(2)(E). To fall within this exclusion, the Government must show, by a preponderance of the evidence, that: (1) the speaker of an out-of-court statement and the party against whom that statement is offered must be coconspirators (the "coventurer requirement"); (2) the statement must be made during the course of the conspiracy (the "pendency requirement"); and (3) the statement must be made in furtherance of the conspiracy (the "furtherance requirement"). See generally 4 Christopher B. Mueller and Laird C. Kirkpatrick, FEDERAL EVIDENCE § 8:58 at 486 (4th ed. 2013).
Heine moves to exclude both the Government and Yates from introducing against Heine any out-of-court statements by any alleged coconspirators during and in furtherance of the conspiracy, but made during a time period when Heine was not participating in the alleged conspiracy (i.e., any statement that does not satisfy the pendency requirement). Heine argues that the Government alleges that the conspiracy at issue continued into September 2014, more than two years after the last alleged false entry was made, after Yates resigned, after Heine fired Geoffrey Walsh, and after Heine reported Walsh to the FBI. Heine contends that, even if he was participating in an alleged conspiracy, by mid-2012, he was no longer participating in any agreement with either Yates or Walsh. Heine further argues that the Government's allegation of a conspiracy continuing after mid-2012 is a tactical maneuver to permit the Government to characterize hearsay statements made after mid-2012 (including statements made during the Government's investigation) as non-hearsay under Fed. R. Evid. 801(d)(2)(E). The Court notes that after "a party withdraws from a conspiracy subsequent statements by a coconspirator do not fall" within the exclusion of Fed. R. Evid. 801(d)(2)(E). United States v. Nerlinger, 862 F.2d 967, 974 (2d Cir. 1988).
In response, the Government asserts: "The Pinkerton doctrine computes liability on conspirators for the overt acts of their co-conspirators. United States v. Pinkerton, 328 U.S. 640, 646 (1946)." ECF 856 at 19. The Government adds that criminal liability extends for the life of the conspiracy and although a defendant can terminate his or her liability by withdrawing from the conspiracy, the defendant bears the burden of proving withdrawal. Id. Thus, the Government concludes, the Court cannot make the factual determination about whether and when a defendant effectively withdrew from the alleged conspiracy. Id. The Government offers this same response against Yates's similar motion. Id. (regarding Yates's motion in ECF 671.) In reply, Heine argues that "Pinkerton addresses the circumstances under which a conviction is proper based on admissible evidence. It does not alter the prerequisites for admitting evidence under Rule 801." ECF 873 at 2.
Under Supreme Court and Ninth Circuit precedent, "extra-judicial statements are not admissible against the nondeclarant if made after the chief objective of the conspiracy had ended either in success or failure" United States v. Vowiell, 869 F.2d 1264, 1267 (9th Cir. 1989) (citing Krulewitch v. United States, 336 U.S. 440, 442-43 (1949)). Relevant questions, therefore, are what is the "chief objective" of an alleged conspiracy and when did the conspiracy end. In Grunewald v. United States, 353 U.S. 391 (1957), the Supreme Court stated that acts of concealment of a crime are not necessarily a continuation of the conspiracy:
Grunewald, 353 U.S. at 402. The Court in Grunewald listed several crimes that necessarily include concealment as acts necessary to accomplish the crime itself itself, including "[k]idnapers in hiding, waiting for ransom" and "repainting a stolen car." Grunewald, 353 U.S. at 405. Mere acts of covering up that "indicate nothing more than that the conspirators do not wish to be apprehended" are insufficient to establish that the conspiracy still exists for the purposes of the hearsay exception. Id. at 406. Since Grunewald, courts have struggled to determine when the chief objective of a conspiracy has been accomplished or frustrated and when that chief objective involves concealment.
There are a handful of scenarios in which courts seem to agree that a conspiracy has ended for purposes of the coconspirator exclusion from hearsay and any purported concealment was not in furtherance of the "main objective" of the conspiracy. For example, a conspiracy has ended after the conspirators are in custody. See United States v. Barrett, 1992 WL 116229, at *3 (9th Cir. 1992) (unpublished) ("[t]he conspiracy had clearly ended three days after the robbery, when [coconspirator declarants] were in police custody"). In cases involving bribery, the conspiracy has ended after the payment has been made and the objective of the payment has been achieved:
Simulnet E. Assocs. v. Ramada Hotel Operating Co., 1997 WL 429153 (9th Cir. 1997); see also United States v. Magluta, 418 F.3d 1166, 1178-79 (11th Cir. 2005) (relying on Grunewald in ruling against the admission of a coconspirator's declaration in a juror bribery case, when the declaration was made after the verdict was rendered and payment made).
If, however, conspirators are continuing to reap rewards from their crime, courts will generally not consider the conspiracy to have come to an end. Farber v. State of Or., 1990 WL 56844, at *2 (9th Cir. 1990) (unpublished) (finding that after a murder had been committed, discussion of the murderer's payment meant the conspiracy still existed because "[p]ayment is an integral and often final term in a conspiracy"); United States v. Hong Vo, 978 F.Supp.2d 49, 56 (D.D.C. 2013) (finding that the distribution of funds collected in exchange for illegally obtained visas furthered the conspiracy, even after a coconspirator left his consular post, ending the cashfor-visa scheme).
In crimes in which the chief objective is concealment, courts will find that the conspiracy extended beyond overt acts in furtherance of the conspiracy. The Seventh Circuit held that a tax evasion conspiracy included a conspiracy to conceal, thereby extending the conspiracy to cover the time period in which a coconspirator made the contested declaration. United States v. Mackey, 571 F.2d 376, 384 (7th Cir. 1978). The court in that case held that a "broad effort to evade taxes . . . by its nature required a substantial effort at concealment." Id. at 383. The court also noted that there was no "single event" terminating the conspiracy, unlike an arrest or the completion of a bank fraud in other cases. Id. at n. 10.
In the pending case, whether the alleged conspiracy continued after Yates left the bank depends on how the chief objective of the alleged conspiracy is defined. If the chief objective of the conspiracy was to cover Heine and Yates's poor performance in managing the bank in order to ensure that they kept their jobs, salaries, and benefits, then that objective appears to have been frustrated when Yates left the bank. If, however, the chief objective of the alleged conspiracy was to mislead the FDIC and Bank's Board and investors, then the case looks more like the tax evasion at issue in Mackey, in which the conspiracy, by its nature, required long-term concealment, with no single event terminating the conspiracy.
The Court will defer ruling on this issue until trial, when the Government's evidence (and the parties' arguments) regarding the coventurer, pendency, and furtherance requirements of Rule 801(d)(2)(E) can be evaluated in their factual and legal contexts. This includes evidence and arguments relating to what was the chief objective of the alleged conspiracy and when did the conspiracy end.
GRANTED IN PART; DEFERRED IN PART UNTIL TRIAL.
Heine moves to exclude evidence and argument relating to his legal defense costs and the fact that his legal representation includes lawyers from New York. The Government responds that it does not intend to introduce evidence of the source or amount of Heine's legal fees or the fact that Heine's lead counsel are based in New York, unless Heine "opens the door" to such evidence. Heine takes issue with the Government's examples of "opening the door."
The Government states that if Heine presented evidence that he was a community banker and only supported local community businesses, the Government might ask the Court if that opened the door to present evidence that Heine hired lawyers from New York to defend him in this case. It does not appear to the Court, however, that such a question, without more, would open the door in this area. That said, the Court does not believe that any prejudice would result if the jury were to learn that Heine hired New York lawyers to defend him in this case.
The Government also states that it does not intend to introduce evidence regarding either the amount of Heine's legal fees or the Bank's indemnification obligation, unless a defendant opens the door to such evidence. As an example, the Government argues that if a defendant were to present evidence or argument that the Bank suffered no economic loss as a result of the charged conduct, the Government should be able to show the loss to the Bank incurred in financing the legal defense. The Government adds that it will notify defendants and the Court in advance and seek a ruling before presenting any such evidence or argument. That procedure is acceptable.
DENIED.
Heine moves for the Court to direct the Government to provide defendants a proffer of all coconspirator statements to be introduced at trial, along with certain related information. Heine argues that the Court has discretion to enter such an order. Heine also acknowledges that the Ninth Circuit has declined to adopt a rule of mandatory pretrial determination. See United States v. Zemek, 634 F.2d 1159, 1169 (9th Cir. 1980). Yates makes the same motion. ECF 687. The Government opposes both motions.
The Court declines to require the Government to identify in advance of trial which statements the Government will seek to introduce through the hearsay exclusion set forth in Fed. R. Evid 801(d)(2)(E). See generally United States v. Keele, 2011 WL 978540, at *6 (N.D. Tex. 2011). As the court in Keele recognized
Id. (single quotation marks and citation omitted). This Court follows the approach described in Keele.
DENIED.
Heine moves to preclude Yates and the Government from using "inflammatory language concerning Mr. Heine" during jury addresses and witness examinations. The Court declines to rule on this issue in the abstract. The parties may raise any specific objection at trial. See generally United States v. Rude, 88 F.3d 1538, 1548 (9th Cir. 1996) (upholding the use of the following terms, among other others: scam, Ponzi scheme, victim, outlandish, charlatan, con, deceit, fool's mission, and front person).
DENIED.
Heine moves to exclude evidence or argument of purported false entries in Call Reports other than those expressly alleged in Counts 2-17 of the Indictment. Heine argues that allowing that evidence would constitute a variance from the allegations in the Indictment. As explained by Heine, "[a] variance occurs when the proof introduced at trial differs materially from the facts alleged in the indictment." 3 Charles Alan Wright, FEDERAL PRACTICE AND PROCEDURE, Criminal § 516 (2d ed.1982). A variance that affects a substantial right of the accused is reversible error. See United States v. Tsinhnahijinnie, 112 F.3d 988 (9th Cir. 1997). The Court will be sensitive to defendants' arguments of variance and will consider appropriate motions at the appropriate time. The exclusion of otherwise admissible evidence, however, is not the appropriate response to a concern about variance.
The bank fraud statute is unique in that it punishes the execution of a fraudulent scheme rather than punishing the individual acts furthering the scheme. United States v. Molinaro, 11 F.3d 853, 860 (9th Cir. 1993). "[U]ncharged transactions that are part of an overall scheme are part of the same transaction as the charged transactions." United States v. Loftis, 843 F.3d 1173, 1178 (9th Cir. 2016) (internal citations and quotation marks omitted).
Evidence of uncharged transactions in an overall scheme are part of the same charge and not "other acts" evidence under Fed. R. Evid. 404(b). Thus, this evidence can be admitted for more than the limited purposes of Rule 404(b). In addition, the Ninth Circuit regards each execution of a single scheme as a separate criminal act. United States v. Poliak, 823 F.2d 371 (9th Cir. 1987). To determine whether certain acts are multiple executions of one scheme, the court considers whether the executions were separate transactions, whether they were "chronologically and substantively independent," and whether the acts "each had its own functions and purpose." Molinaro, 11 F.3d at 860.
Accordingly, the admissibility of Heine and Yates's alleged acts or false statements or omissions that were not specifically alleged in the Indictment depends on whether the conduct was part of the same fraudulent scheme. The Indictment describes the manner and means of the alleged conspiracy as including payments made on certain delinquent loans, wire transfers, and loans made to customer M.K., facilitating a straw buyer purchase of the A Avenue Property, removing properties from the bank's OREO account, and making misrepresentations to shareholders. If Heine and Yates committed other acts that are interdependent on these activities, those acts support the same execution of one scheme to defraud and are, thus admissible.
DENIED.
See Fed. R. Civ. P. 103(a).
DENIED.
Heine moves for an order precluding the Government from making use of ambiguous compound questions and collective reference to both Defendants. In the abstract, the Court agrees with Heine that ambiguous compound questions are inappropriate, but that issue is best left to counsel making a specific objection at trial to a specific question. The Court also generally agrees that a collective reference to both Defendants may be inappropriate. At other times, however, it might not be so. The Court will consider at trial any timely objections to any specific questions or collective reference.
DEFERRED UNTIL TRIAL.
The Court has already stated that it will permit Defendant Yates to introduce evidence that her work papers and other documents were destroyed by Bank employees, generally and by Heine, specifically, provided she can establish the relevance of those work papers and other documents. ECF 725. This action is without prejudice to any party's right at trial to object to any specific question or exhibit.
Rule 404(a) of the Federal Rules of Evidence prohibits evidence of a person's character or character trait "to prove that on a particular occasion the person acted in accordance with the character or trait." Fed. R. Evid. 404(a). This is sometimes referred to as "propensity evidence." Similarly, Rule 404(b)(1) prohibits evidence of a crime, wrong, or other act, "to prove a person's character in order to show that on a particular occasion the person acted in accordance with the character." Fed. R. Evid. 404(b)(1). Rule 404(b)(2), however, provides that evidence of a crime, wrong, or other act "may be admissible for another purpose, such as proving motive, opportunity, intent, preparation, plan, knowledge, identity, absence of mistake, or lack of accident." Fed. R. Evid. 404(b)(2).
When the Government offers evidence of "other acts," also known as "prior bad acts," under Rule 404(b)(2), the trial court must decide:
See 1 Christopher B. Mueller and Laird C. Kirkpatrick, FEDERAL EVIDENCE § 4:29 at 743 (4th ed. 2013) (citing Huddleston v. United States, 485. U.S. 681 (1988); see also United States v. Plancarte-Alvarez, 366 F.3d 1058 (9th Cir. 2004), opinion amended on denial of reh'g, 449 F.3d 1059 (9th Cir. 2006) (holding that evidence of prior bad acts is admissible under Federal Rule of Evidence 404(b) if: (1) the evidence tends to prove a material element of the offense charged, (2) the prior act is not too remote in time, (3) the evidence is sufficient to support a finding that the defendant committed the other act, and (4) in cases where knowledge and intent are at issue, the act is similar to the offense charged).
Rule 404(b) "is inapplicable, however, where the evidence the government seeks to introduce is directly related to, or inextricably intertwined with, the crime charged in the indictment." United States v. Rizk, 660 F.3d 1125, 1131 (9th Cir. 2011) (citation omitted). "Other act" evidence is considered to be inextricably intertwined when: (1) it is part of a transaction that forms the basis for the charge; or (2) the evidence is necessary to make the case comprehensible or explain the circumstances surrounding the crime. United States v. Loftis, 843 F.3d 1173, 1177-78 (9th Cir. 2016); United States v, Rrapi, 175 F.3d 742, 748-49 (9th Cir. 1999) ("Evidence is `inextricably intertwined' if it `constitutes a part of the transaction that serves as a basis for the criminal charge,' or `was necessary to . . . permit the prosecutor to offer a coherent and comprehensible story regarding the commission of the crime.'") (citation omitted).
In addition, "[a] jury is entitled to know the circumstances and background of a criminal charge." United States v. Daly, 974 F.2d 1215, 1217 (9th Cir. 1992) (internal quotations omitted). "It cannot be expected to makes its decision in a void-without knowledge of the time, place and circumstances of the acts which form the basis of the charge." Id. See also United States v. Senffner, 280 F.3d 755, 764-67 (7th Cir. 2002) (holding that, in mail fraud prosecution, evidence of other acts is inextricably intertwined where it: (1) completes the story of the crime on trial, (2) its absence would create a chronological or conceptual void in the story of the crime, or (3) it is so "blended or connected" that it "incidentally involve[s], explain[s] the circumstances surrounding, or tend[s] to prove any element of, the charged crime.").
Thus, in fraud cases, the Ninth Circuit has affirmed the admission of other, uncharged fraudulent transactions, Loftis, 843 F.3d at 1177-78, and has affirmed the admission of evidence proffered to explain why a defendant took certain actions. For example, the government properly introduced evidence about a defendant's prior three insured vessel losses because it explained why he could not obtain insurance under his own name, and why he perjured himself. United States v. DeGeorge, 380 F.3d 1203 (9th Cir. 2004).
Finally, although it is the Government that usually invokes Rule 404(b) against a defendant, the rule also applies when a defendant seeks to offer such evidence against any other person, including a co-defendant. United States v. McCourt, 925 F.2d 1229 (9th Cir. 1991). When used in this manner, such evidence is sometimes called "reverse 404(b)" evidence. Further, "the standard of admissibility when a criminal defendant offers similar acts evidence as a shield need not be as restrictive as when a prosecutor uses such evidence as a sword." United States v. Wright, 625 F.3d 583, 608 (9th Cir. 2010) (quoting United States v. Aboumoussallem, 726 F.2d 906, 911 (2d Cir. 1984)). Rather, "courts should indulge the accused when the defendant seeks to offer [other acts] evidence of a third person for an issue pertinent to the defense other than propensity." McCourt, 925 F.2d at 1236. As long as the evidence is not offered for propensity purposes, "the only issue arising under Rule 404(b) is whether the evidence is relevant to the existence or non-existence of some fact pertinent to the defense." Aboumoussallem, 726 F.2d at 912. The evidence also is subject to a balancing test for unfair prejudice under Rule 403. United States v. Cruz-Garcia, 344 F.3d 951, 956 n.4 (9th Cir. 2003).
GRANTED.
GRANTED IN PART; DENIED IN PART; WITH LIMITATIONS. See Section A(3)(b), supra (discussing character evidence).
GRANTED.
GRANTED IN PART; DENIED IN PART; WITH LIMITATIONS.
If Defendant Yates elects to testify, she may, if truthful, present testimony that part of the reason she felt "overworked" was due to having to "clean up" related to Defendant Heine's purported extramarital affair. She also may, if truthful, present testimony explaining that this is part of why she resigned and why she decided to speak with the Board and the FBI. She also may, if truthful, present testimony explaining that this is what she meant when she told the FBI that she was tired of "covering up" for Defendant Heine. Yates, however, may not describe any of the specific details of this purported act. The probative value of any specific details is substantially outweighed by the danger of unfair prejudice. Fed. R. Evid. 403.
DENIED.
This evidence is relevant to motive, intent, absence of mistake, and lack of accident. In addition, a defendant's deteriorating financial condition and use of the Bank's financial services is intrinsically intertwined with the alleged illegal conduct. Further, the Government must show that Defendants sought to deprive the Bank of something of value. Defendants' jobs, including their salaries and benefits, and their access to the Bank's checking accounts and lines of credit, are relevant to showing that Defendants sought to deprive the Bank of something of value.
GRANTED.
GRANTED.
The Government states that it does not intend to introduce this evidence. Although Yates seeks to introduce this evidence, the apparent purpose is to show propensity. See ECF 853 at 6-7. That is not a proper purpose. See Fed. R. Evid. 404(a), (b)(1).
DENIED.
A defendant's deteriorating financial condition is intrinsically intertwined in this case with the alleged illegal conduct. In addition, this evidence is relevant to motive and intent.
DENIED.
This evidence is relevant to motive and intent. In addition, a defendant's deteriorating financial condition and use of the Bank's financial services is intrinsically intertwined in this case with the alleged illegal conduct and the Government's requirement to show that Defendants sought to deprive the Bank of something of value.
DENIED.
This evidence is relevant to motive, intent, absence of mistake, and lack of accident. In addition, a defendant's deteriorating financial condition and use of the Bank's financial services is intrinsically intertwined in this case with the alleged illegal conduct. Further, the Government must show that Defendants sought to deprive the Bank of something of value. Defendants' jobs, including their salaries and benefits, and their related access to the Bank's checking accounts and lines of credit, are relevant to showing that Defendants sought to deprive the Bank of something of value.
DENIED.
This evidence is relevant to motive, intent, absence of mistake, and lack of accident. This evidence is relevant to motive. In addition, a defendant's deteriorating financial condition and use of the Bank's financial services is intrinsically intertwined in this case with the alleged illegal conduct.
DENIED.
This evidence is relevant to motive. In addition, a defendant's deteriorating financial condition and use of the Bank's financial services is intrinsically intertwined in this case with the alleged illegal conduct. Further, the Government must show that Defendants sought to deprive the Bank of something of value. Defendants' jobs, including their salaries and benefits, and their access to the Bank's checking accounts and lines of credit, are relevant to showing that Defendants sought to deprive the Bank of something of value.
DEFERRED UNTIL TRIAL.
This decision is without prejudice to any party's right at trial to object to any specific question or exhibit.
GRANTED.
The Government states that it does not intend to introduce this evidence. Although Yates seeks to introduce this evidence, the apparent purpose is to show propensity. See ECF 853 at 6-7. That is not a proper purpose. See Fed. R. Evid. 404(a), (b)(1).
DEFERRED UNTIL TRIAL.
This decision is without prejudice to any party's right at trial to object to any specific question or exhibit.
GRANTED.
GRANTED.
GRANTED IN PART; DENIED IN PART.
If Defendant Yates elects to testify, she may, if truthful, present testimony that part of the reason she felt "overworked" was due to having to "clean up" related to Defendant Heine's charitable donation made on behalf of the Bank. She also may, if truthful, present testimony explaining that this is part of why she resigned and why she decided to speak with the Board and the FBI. She also may, if truthful, present testimony explaining that this is what she meant when she told the FBI that she was tired of "covering up" for Defendant Heine.
DENIED.
This evidence is relevant to motive. In addition, a defendant's deteriorating financial condition and use of the Bank's financial services is intrinsically intertwined in this case with the alleged illegal conduct. Further, the Government must show that Defendants sought to deprive the Bank of something of value. Defendants' jobs, including their salaries and benefits, and their access to the Bank's checking accounts and lines of credit, are relevant to showing that Defendants sought to deprive the Bank of something of value.
DENIED.
This evidence is relevant to motive. In addition, a defendant's deteriorating financial condition is intrinsically intertwined in this case with the alleged illegal conduct. Further, the Government must show that Defendants sought to deprive the Bank of something of value. Defendants' jobs, including their salaries and benefits, and their access to the Bank's checking accounts and lines of credit, are relevant to showing that Defendants sought to deprive the Bank of something of value.
DEFERRED UNTIL TRIAL.
See generally ECF 565 and ECF 783.
GRANTED IN PART; DEFERRED IN PART UNTIL TRIAL.
See Rulings in Section A(8) and Section B(5), supra.
DEFERRED UNTIL TRIAL.
Yates moves to exclude Rule 404(b) evidence of "other acts" that have not been timely disclosed by the Government. The Government does not appear to oppose his motion in concept. This action is without prejudice to any party's right at trial to object to any specific question or exhibit.
GRANTED.
DEFERRED UNTIL TRIAL.
This decision is without prejudice to any party's right at trial to object to any specific question or exhibit.
DENIED.
DENIED.
DENIED.
DENIED.
GRANTED IN PART; DEFERRED IN PART UNTIL TRIAL.
See discussion at Section B(5), supra.
DENIED.
DEFERRED UNTIL TRIAL.
This decision is without prejudice to any party's right at trial to object to any specific question or exhibit.
DENIED.
This evidence is relevant to motive. In addition, a defendant's deteriorating financial condition and use of the Bank's financial services is intrinsically intertwined in this case with the alleged illegal conduct. Further, the Government must show that Defendants sought to deprive the Bank of something of value. Defendants' jobs, including their salaries and benefits, and their access to the Bank's checking accounts and lines of credit, are relevant to showing that Defendants sought to deprive the Bank of something of value.
DENIED.
GRANTED IN PART.
Yates moves to exclude out-of-court inculpatory statements by Heine about Yates, if offered for the truth of the matter asserted. In response, the Government states:
ECF 856 at 53. The Court finds that procedure acceptable.
DENIED.
DEFERRED UNTIL TRIAL.
This decision is without prejudice to any party's right at trial to object to any specific question or exhibit.
DEFERRED UNTIL TRIAL.
DEFERRED UNTIL TRIAL.
This decision is without prejudice to any party's right at trial to object to any specific question or exhibit.
DENIED.
DENIED. See also Section C(12), supra.
DEFERRED UNTIL TRIAL.
This decision is without prejudice to any party's right at trial to object to any specific question or exhibit.
DEFERRED UNTIL TRIAL.
This decision is without prejudice to any party's right at trial to object to any specific question or exhibit.
DEFERRED UNTIL TRIAL.
This decision is without prejudice to any party's right at trial to object to any specific question or exhibit.
DEFERRED UNTIL TRIAL.
This decision is without prejudice to any party's right at trial to object to any specific question or exhibit.
DEFERRED UNTIL TRIAL.
This decision is without prejudice to any party's right at trial to object to any specific question or exhibit.
DEFERRED UNTIL TRIAL.
This decision is without prejudice to any party's right at trial to object to any specific question or exhibit.
SUSTAINED IN PART; OVERRULED IN PART.
Defendant Yates moves to exclude all testimony from Mark Dixon, whom the Government intends to call to authenticate and discuss Trial Exhibits 91, 351, and 392. Yates also moves to exclude those exhibits. Dixon is a banker who first met Yates in 1998 when both were employed at either A.G. Edwards, Inc. (a holding company) or A.G. Edwards & Sons, Inc. (a full-service securities broker-dealer). Yates and Dixon had regular email correspondence for much of the time that Yates was employed by the Bank. Yates argues that testimony by Dixon and these three exhibits should be excluded as irrelevant, as improper character evidence, and as unfairly prejudicial.
Exhibit 91 is an email from Yates to Dixon dated July 17, 2009, discussing the Obama administration's plan to hold stockbrokers and other financial advisers to a fiduciary standard (i.e., the "fiduciary rule") when providing financial or investment advice to clients. Yates writes to Dixon: "We are all going to be so regulated and be forced to circumvent rules." The fiduciary rule that is the subject of this communication is not directly involved in any of the charged offenses. Nevertheless, this "other act" evidence is relevant and admissible under Rule 404(b)(2) to show Yates's intent, absence of mistake, and lack of accident. The Government must show that the charged misrepresentations were material and made to the FDIC (or to the Bank's directors and shareholders) with the intent to deceive and were done knowingly and not as the result of mistake or accident. This evidence is relevant to those issues and also to Yates's asserted defense of "good faith."
Exhibit 351 is an email from Yates to Dixon dated November 4, 2011, in which she states "I am deleting old emails today off my system." During the course of the proceedings in this case, Yates has indicated that she contends that Defendant Heine or the Government is responsible for Yates's "missing" Bank emails from January 19, 2008 through March 4, 2009, and October 4, 2010, through August 22, 2011. Yates has requested a "missing evidence instruction" that would allow the jury to make an adverse inference that the missing material would have been favorable to her. ECF 650 at 13. To the extent that Yates continues to assert that either Heine or the Government deleted some of her old emails, including emails dated less than three months before Yates sent Exhibit 351, this email is relevant to show that she knows how to delete old emails from her system at the Bank and on occasion has done so. Upon timely request by Yates, however, the Court will direct the portion of Exhibit 351 that reflects Dixon's comments (from "thank you" to "$275K") be redacted. The jury may be told that this comment by Dixon was removed at the direction of the Court to redact or remove irrelevant material.
Exhibit 392 is an email from Defendant Heine to Dixon dated October 4, 2010. This email is both inextricably intertwined with the charges in the case and also is relevant under Rule 404(b)(2) to show motive, intent, absence of mistake, and lack of accident on the part of Heine. It is not inappropriate.
Finally, Yates argues that other inappropriate information regarding her and Dixon might cause her unfair prejudice. Yates argues that Dixon's entire testimony should be excluded under Rule 403. The Government responds that it anticipates asking Dixon only whether he knows Yates, how long he has known her, where he met her, whether they kept in contact after she left A.G. Edwards, and whether he was aware that she worked at the Bank during the period reflected in the emails of Exhibit 91, 351, and 392, as well as background information involving Dixon and Heine relevant to Exhibit 392. None of these questions should elicit the inappropriate information about which Yates is concerned. Accordingly, Yates's objection to Dixon's testimony is overruled, but both the Government and Heine are ordered not to elicit, without prior leave of the Court, any of the inappropriate information regarding Yates and Dixon to which Yates refers in her motion. This ruling is without prejudice to Yates's ability to elicit that information during her cross-examination of Dixon, but such questioning by Yates likely would "open the door" to related follow-up questioning by the Government or Heine.
DENIED.
See discussion, supra, denying Heine's Motion in Limine seeking Proffer of Coconspirator Statements (ECF 655).
DENIED.
DEFERRED UNTIL TRIAL.
Defendants Heine and Yates object to many of the exhibits listed on the Government's exhibit list. ECF 820 (Yates's objections); ECF 822 (Heine's objections). Heine also objects to many of the exhibits listed on Yates's exhibit list (ECF 813), and Yates objects to many of the exhibits listed on Heine's exhibit list (ECF 819). In addition, the Government objects to many of the exhibits listed on Heine and Yates's respective exhibit lists. ECF 803. Except as otherwise discussed in this Opinion and Order, the Court will wait until trial to rule on specific objections timely made to any specific exhibit.
See generally ECF 565 and ECF 783.
DEFERRED UNTIL TRIAL.
See generally ECF 565 and ECF 783.
See generally ECF 565 and ECF 783.
DENIED IN PART; DEFERRED IN PART.
The government has agreed to make FDIC-OIG Special Agent Michael Wixted available at trial for direct examination by Yates during her case-in-chief. To the extent that Yates has proper questions for Agent Wixted, they will be allowed. To the extent that Yates intends to attempt to show investigatory bias or improper conduct generally by the FDIC or the FDIC-OIG, the Court likely will exclude any such evidence as irrelevant or otherwise inappropriate under Fed. R. Evid. 403. See Section A(6), supra. Upon timely request, Yates will be afforded an opportunity to make an offer of proof outside the presence of the jury.
Defendant Heine was indicted on June 23, 2015. His trial, along with Co-Defendant Yates, is set to begin on October 10, 2017—more than twenty-seven months after the original indictment. Heine argues that this delay, and the resulting prejudice to his defense, violates his Sixth Amendment guarantee of a speedy trial and therefore justifies dismissal of the indictment.
A court considering the merits of a constitutional challenge to the timeliness of a criminal trial must evaluate: (1) the length of the delay, (2) the reason for the delay, (3) the defendant's assertion of his speedy trial right, and (4) the prejudice to the defendant. United States v. Mendoza, 530 F.3d 758, 762 (9th Cir. 2008) (citing Barker v. Wingo, 407 U.S. 514, 532 (1972)). No single factor is either a necessary or sufficient condition to the finding of a deprivation of the right to a speedy trial. Id. (citing Barker, 407 U.S. at 533). The Ninth Circuit, however, has recognized that "[t]he second factor, the reason for delay, is `the focal inquiry'" United States v. Alexander, 817 F.3d 1178, 1182 (9th Cir. 2016). In this case, the passage of twenty-seven months from indictment to trial is a "presumptively prejudicial" delay, which merits inquiry into the other three factors. See United States v. Beamon, 992 F.2d 1009, 1013 (9th Cir. 1993). In addition, Heine has consistently and timely asserted his right to a speedy trial. Thus, whether the indictment against Heine should be dismissed turns on the reason for the delay and the prejudice to Heine.
The Court originally scheduled the trial to begin in November 2016, sixteen months after the original indictment, based on the Court's finding that this multi-count, two-defendant white collar fraud case alleging conspiracy to commit bank fraud and making false bank entries is complex. The trial was then twice delayed, first to May 2017 after Defendants received voluminous documents in response to third-party subpoenas served on The Bank of Oswego two months before trial, and then to its current date in October 2017, after Defendants received from the government a thumb drive with voluminous emails, many of which had not previously been turned over. Heine argues that the delays in this case were caused by the government's negligence in failing earlier to review all of the documents that it had in its possession.
When inquiring into the reason for a delay, the court considers whether the government or the defendant "is more to blame for the delay." United States v. Vasquez, 151 F. Supp. 3d. 1000, 1003 (E.D. Cal. 2014). Moreover, "[i]f the government intentionally delayed or negligently pursued the proceedings, [] prejudice may be presumed, and its weight in the defendant's favor depends on the reason for the delay and the length of the delay." United States v. Sears, Roebuck and Co., Inc., 877 F.2d 734, 739 (9th Cir. 1989).
This case is complex. The superseding indictment contains one count of conspiracy to commit bank fraud and 18 counts of making false bank entries against two defendants, a former bank president and a former bank senior vice president and chief financial officer. The alleged conspiracy spans approximately five years. The government's initial discovery disclosure contained more than 177,000 pages. See ECF 14 at 2 (Defendant Yates's Motion for Complex Case Designation). Before the Court's pretrial conference, the government marked and submitted 552 trial exhibits (ECF 792), Defendant Yates marked and submitted 851 trial exhibits (ECF 797), and Defendant Heine marked and submitted 1,603 trial exhibits (ECF 790). Before the Court's pretrial conference, the government stated that it anticipated calling 51 witnesses in its case-in-chief, although that number has since declined to a range of 35-40 witnesses. Defendants stated that, collectively, they may call an additional 40 witnesses. All three parties requested that the Court set the jury trial in this case for five weeks. Given the quantity of anticipated evidence, both testimonial and documentary, and the nature and duration of the alleged financial deception, the Court's designation of this case as complex is warranted. In addition, the further delays in bringing this case to trial arose from this complexity, not from the fault of any party.
The first trial date delay, in which the Court reset the schedule from the original November 2016 trial date to May 2017, resulted from the production of approximately 150,000 documents from The Bank of Oswego in response to Defendant Yates's subpoenas served shortly before the November 2016 trial date. Yates explained that because she resigned from The Bank of Oswego in March 2012, more than two years before Heine resigned from the Bank in September 2014, Yates needed to obtain and review documents from the Bank with which Heine already would have been familiar. Defendant Yates argued, without opposition from the government, that her right to due process required a delay of several months. See ECF 425 at 1-2. In support of his current motion to dismiss, Heine argues that because the government was in possession of many documents from The Bank of Oswego, the government was obligated to turn them over, rather than require Defendants to wait for the Bank to respond to their subpoenas. The Court has already ruled that the government did not violate any of its discovery obligations. ECF 182. (Order Denying Defendants' Motion for Discovery). Thus, the first delay was due simply to the voluminous evidence and potential evidence in this case and was not the fault of the any party.
The second delay in beginning trial, which postponed the May 2017 trial date to the current October 2017 trial date, resulted from the government's disclosure in March 2017 of a thumb drive containing hundreds of thousands of emails that the FDIC-OIG had previously provided to the government, which the government erroneously thought was duplicative of documents that had already been provided. The government explained that it believed that the Bank had already disclosed all of documents contained on the thumb drive to the Defendants in response to Defendants' Rule 17(c) subpoenas served on the Bank. ECF 700-1 at 2-3 (March 16, 2017 Letter from government). As soon as the government's trial team discovered that there were some Bank emails contained on the thumb drive had not been included in the Bank's earlier disclosures to defendants, the government promptly provided Defendants with copies of the thumb-drive. Id. As the government explained, it had believed that the documents on the thumb drive were "largely duplicative, and most are likely not relevant," but the government produced copies of the thumb drive out of an "abundance of caution." Id. at 4. Both Heine and Yates told the Court that they needed more time to review the contents of the thumb-drive, and the Court concluded that Defendants were entitled to a delay of trial to ensure that their defense teams had sufficient opportunity to review the potentially new documents. Nevertheless, the government's earlier belief that the documents on the thumb-drive already had been made available, and were either duplicative or not relevant, was reasonable. As the government noted, the Bank's production to the Defendants "should have encompassed all of the relevant emails (and more) collected by the FDIC in its examination and civil investigation." Id. at 2. Further, that the nonduplicative documents were in fact largely irrelevant is bolstered by the fact that, after a thorough review of the new documents, both Defendants made only very minor changes to their lists of marked, anticipated trial exhibits. Thus, for both times that the Court rescheduled the trial date, the reason for delay was the volume and complexity of the documentary evidence that needed to be reviewed by Defendants. Neither party, therefore, is more to blame for the delay, and this factor does not weigh in favor of Heine's motion to dismiss.
Delay of trial may prejudice a defendant by "the possibility that the [accused]'s defense will be impaired by dimming memories and loss of exculpatory evidence." Mendoza, 530 F.3d at 764. Absent bad faith, prejudice will not be presumed, but must be proven. See Doggett v. United States, 505 U.S. 647, 656 (1992), citing Barker, 407 U.S. at 531.
In support of his motion to dismiss, Heine argues that his defense has been impaired because one of his witnesses has become unavailable due to deteriorating physical and cognitive health. The likely unavailability of the witness may moderately impair Heine's defense. Heine has presented evidence that the witness would have testified to Heine instructions given by Heine to that witness that might permit an inference regarding Heine's state of mind after the Bank fired Walsh. Heine asserts that the witness would have testified that Heine instructed the witness to conduct an unrestricted investigation into Walsh's loan portfolio. This, Heine argues, is inconsistent with the actions of a person's with a guilty conscience or something to hide.
Such moderate prejudice, however, is insufficient to justify dismissal of the indictment against Heine, given that the delay in his trial was justified by the complexity of the case. Although the witness's potential testimony, as described by Heine, is relevant to rebut alleged attempts to conceal the alleged scheme to defraud, it does not speak to the core allegations in the indictment: the alleged false bank entries made between approximately September 2009 and January 2012. Moreover, the unavailable witness is only one of approximately 40 anticipated defense witnesses, and Heine does not argue or present any evidence that this person is the only witness who can present evidence from which the jury can draw the inferences about Heine's state of mind after the Bank fired Walsh that Heine intends to argue. Thus, when the delay in trial is justified by the extraordinary volume of documentary evidence and the defense is only moderately and speculatively prejudiced, dismissal of the indictment is not warranted. Defendant Heine's Motion for Dismissal is denied.
GRANTED IN PART; DEFERRED IN PART.
Heine's Exhibit 4733 is a letter dated July 7, 2014, from Yates's lead trial counsel to the FDIC. The letter makes extensive reference to the FDIC's civil enforcement action against Yates. Attached to that letter is a personal financial statement from Yates. The Court will exclude any evidence, reference, or argument relating to the FDIC's civil investigation to extent that it seeks to show that the FDIC decided to bring a civil enforcement action against Yates but not Heine. See Section A9(6), supra. To the extent that Heine seeks to introduce evidence showing Yates's financial condition, such evidence will be allowed to the extent relevant and not otherwise excludable under Rule 403.
Defendant Heine challenges several counts alleging violations of 18 USC § 1005 (false bank entry) on the grounds of multiplicity. He argues that because "Counts 5-9 all refer to a single entry in the Q3-2010 Report; Counts 11-4 all relate to a single entry in the Q1-2011 Call Report; and Counts 16-17 all relate to a single entry in the Q4-2011 Call Report," these counts are improperly multiplicitous.
An indictment is multiplicitous "if it charges a single offense in more than one count." United States v. Awad, 551 F.3d 930, 937 (9th Cir. 2009). The test for multiplicity is whether each count requires proof of an additional fact that another does not. Id. (citations omitted). "A multiplicitous indictment threatens to prejudice a defendant by producing two penalties for one crime, raising double jeopardy questions." Howard v. United States, 2011 WL 4591909, at *2 (E.D. Cal. Sept. 30, 2011) (citing United States v. Stewart, 420 F.3d 1007, 1011 (9th Cir.2005)).
Heine presents case law supporting the principle that a single lie told multiple times cannot be the basis of multiple criminal charges. See, e.g., United States v. Olsowy, 836 F.2d 439, 443 (9th Cir. 1987) (holding that a defendant cannot be convicted of multiple identical false statements more than once). What the government alleges in this case, however, are multiple lies told at once. The government alleges that in the relevant Call Reports, Defendants failed to account for multiple loans in a single Call Report entry that asked for an aggregate number. Under the government's theory, each of those unaccounted for loans is the basis of a distinct count of making a false bank entry.
Under the test articulated in Awad, multiple counts are not multiplicitous if each count "requires proof of an additional fact which the other does not," 551 F.3d at 937. See also United States v. Graham, 60 F.3d 463, 467 (8th Cir. 1995) ("separate false statements may be charged in separate perjury counts if they require different factual proof of their falsehood, notwithstanding their relationship to a common nexus of fact.") (citation omitted). The government's indictment satisfies this test. Each count requires proof of a specific transaction, proof that that transaction should have been included in the Call Report, and proof that it was not included. That each alleged omission is reflected in a single entry is a function of the structure of the Call Report, which asks for an aggregate number, not of Defendants' alleged misconduct. Because the government alleges multiple factual bases under which the Call Report entries are false and each of which could independently give rise to criminal liability, there is no risk of "producing two penalties for one crime." See Awad, 551 F.3d at 937. The multiple counts of making a false bank entry, therefore, do not raise double jeopardy questions and are not improperly multiplicitous. Heine's motion to dismiss based on multiplicity is denied.
The Court resolves the parties' motions in limine, motions to dismiss, and other pretrial objections and matters as stated in this Opinion and Order.
