MARCIA S. KRIEGER, District Judge.
This case concerns an alleged fraudulent scheme perpetrated by the owners and employees of Disaster Restoration, Inc. ("DRI"). DRI was in the business of repairing and restoring property damaged by fire, flood, or other disasters for the benefit of property owners and their insurers. DRI retained subcontractors to perform the restoration work and acted as a general contractor for each project. DRI received compensation for its work from the property owners' insurance companies. It submitted either the estimates or the invoices from the subcontractors to the insurance companies for reimbursement along with charges of ten percent of the subcontractors' charges as an overhead fee and another ten percent as profit.
In a previous order, the Court made the following preliminary determinations regarding what the Government's evidence (if unrebutted) would show regarding each Defendant's role
Feb. 27, 2012 Order Regarding Government's James Proffer (#1119), at 6.
Based on the motions, supplemental briefing, and oral arguments, the Court understands the parties to make the following assertions regarding why they should be tried in separate proceedings:
Rule 8 of the Federal Rules of Criminal Procedure generally governs the joinder of defendants for the purposes of trial:
However, the Court has the power under Fed. R. Crim. P. 14(a) to permit separate trials of defendants where a joint trial will cause prejudice.
Severance is a matter of discretion, not a matter of right. United States v. Youngpeter, 986 F.2d 349, 353 (10
A common basis for seeking severance is the concern that evidence presented against a more culpable codefendant will prejudice a less culpable codefendant — a spillover effect. Case law in the Tenth Circuit consistently holds that such risk does not necessarily require severance. Rather, it can be addressed by cautionary instructions. See: United States v. Iiland, 254 F.3d 1264, 1270 (10th Cir. 2001). United States v. Hutchinson, 573 F.3d 1011, 1026 (10
A conflict of interest among codefendants, or antagonistic defenses, may justify separate trials under certain circumstances. Defenses are mutually antagonistic if "the conflict between codefendants' defenses [is] such that the jury, in order to believe the core of one defense, must necessarily disbelieve the core of the other." United States v. Linn, 31 F.3d 987, 992 (10
Violation a specific trial right may be established by showing that a non-testifying codefendant's out-of-court statement inculpates another codefendant in a manner that cannot be remedied other than by separate trials. Under Bruton v. United States, 391 U.S. 123 (1968), if a non-testifying codefendant's statement admissible against one codefendant contains inculpatory information about another, that defendant's Confrontation Clause rights are implicated.
To create a Bruton problem, the statement at issue must be directly inculpatory of the defendant, not merely "inferentially incriminating." United States v. Rahseparian, 231 F.3d 1267, 1277 (10
Mr. Kaskel argues that he will be prejudiced by the significant amount of evidence relating to events occurring after his withdrawal from the conspiracy
The Government anticipates using all of this evidence against other Defendants over the course of an eight-week trial. Mr. Kaskel argues that even with cautionary instructions, there is a risk that the jury may not be able to sort the "wheat from the chaff" due the length of the trial and the volume of the evidence to be presented. Mr. Troudt adopts this argument as well.
Because a spillover effect, such as complained of by these Defendants, often can be remedied with appropriate cautionary instructions, the Court solicited the parties' views regarding measures, short of a severance, that could ameliorate the potential for jury confusion. These included introductory instructions with regard to the need to determine each claim against each Defendant followed by instructions as to the effect of withdrawal from a conspiracy and when Mr. Kaskel and Mr. Troudt left DRI employment. In addition, the Government offered to present the testimony of each witness in chronological fashion so that an instruction could be given to jurors during the course of each witness' testimony when the evidence is no longer applicable to Mr. Kaskel and Mr. Troudt, i.e., when they ceased to be associated with DRI.
If these combination of measures were sufficient to remind the jury that some evidence should not be considered with regard to charges against Mr. Kaskel and Mr. Troudt, they unfortunately jeopardize the other Defendants' right to a fair trial. Counsel for Mr. Blackburn astutely observes that repeated emphasis on the evidence that cannot be considered as against Mr. Kaskel and Mr. Troudt based on allegations that they "withdrew from the conspiracy" could improperly suggest the existence of a conspiracy. Such instructions could also create inordinate distinctions as to culpability between Mr. Kaskel and Mr. Troudt, on one hand, and the remaining Defendants, on the other.
There appears to be no clear solution, short of separate trials, that preserves all Defendants' right to a fair trial. Therefore, Mr. Kaskel and Mr. Troudt
The remaining Defendants contend that the owners and supervisors (Mr. Griggs, Mr. Sharp, Mr. Blackburn) should be tried separately from any employee Defendants (Mr. Travers) because they have antagonistic defenses. Similarly, Mr. Travers argues that because he did not have decisionmaking authority and is charged with significantly fewer counts than the owner/supervisors, he should be tried separately from them because of the risk of prejudice from spillover evidence.
Although it is not known with any certainty what defenses will be asserted, it appears that all Defendants will argue that the Government cannot prove that they had the requisite mens rea for the charges brought. The owner/supervisors intend to defend, in part, by asserting that their conduct was not illegal, or that they did not know that it was illegal. Mr. Travers intends to defend, in part, that he was only following instructions, and if what he was doing was illegal, that he did not know that.
These are not obviously antagonistic defenses. A jury could believe both defenses and acquit both groups— in other words, the jury could believe both that Mr. Travers was merely following instructions with no knowledge of what was occurring (and therefore was not culpable) and that the owner/supervisors were also not culpable because their conduct was not illegal and/or they had no intent to defraud the insurers. Defendants who merely point the finger at the other defendants do not necessarily have mutually antagonistic defenses. Linn, 31 F.3d at 992. Thus, there is no need to sever the trial of Mr. Travers from that of Mssrs. Griggs, Blackburn and Sharp for this reason.
Mr. Travers also argues that he may be subject to the spillover effect of the evidence about the actions of Mssrs. Griggs, Blackburn and Sharp, who were policy makers for DRI. He argues that he had no authority to set pricing, alter invoices, or communicate with the insurance companies, and that he was involved in only a few of the transactions underlying the charges.
Mr. Travers is a low level employee of DRI and is charged with fewer mail fraud counts than the owner/supervisor Defendants. However, a defendant in such a situation is not necessarily prejudiced when tried with codefendants are allegedly more culpable. See Hutchinson, 573 F.3d at 1030-31. The differential between the roles of the Defendants may inure to his benefit. However, if there is risk of prejudice it is appropriately addressed by cautionary instructions to the jury reminding them to determine each charge against each Defendant. Unlike the situation presented with Mr. Kaskel's and Mr. Troudt, there is no showing that the necessary instructions will be so numerous or repetitive as to create prejudice as to the other Defendants.
Moreover, Mr. Travers could not be tried with Mr. Kaskel and Mr. Troudt because of the evidentiary concerns that mandate separate trials for them. Thus, to sever Mr. Travers trial from that of the owner/supervisors would result in at least three separate trials. The potential prejudice Mr. Travers complains of does not justify the expense and inconvenience of a separate trial for charges against him.
Mr. Griggs, Mr. Sharp and Mr. Blackburn also contend that Bruton issues require severance of their trials from those of codefendants. At issue are out-of-court statements made by Mr. Travers. Mr. Travers was interviewed by a NICB investigator and a postal inspector on April 4, 2008; his statements appear in a memorandum summarizing the interview. #
The Government states that it will redact statements of non-testifying codefendants so as to be in compliance with Bruton and its progeny. Mr. Travers' statement has been redacted to remove direct references to other codefendants. However, Mr. Griggs and Mr. Sharp argue that the redactions are insufficient because their individual names are substituted with references to "DRI" or "DRI policies" or "practices at DRI".
The Court finds that the redactions are sufficient to address the Bruton issue. At the hearing the parties were given an opportunity to make a proffer as to the evidence that would be presented with regard to Mr. Griggs' and Mr. Sharp's role at DRI and with specific evidence with regard to "DRI policies or practices." The evidence will show that DRI is a functioning corporation with a Board of Directors and officers, and that both Mr. Griggs and Mr. Sharp own DRI stock. No evidence will be offered to establish that DRI is the alter-ego of its shareholders. Instead, the Government intends to prove the charges against Mr. Griggs and Mr. Sharp based on their direction and implementation of particular practices and policies. Simply because Mr. Griggs and Mr. Sharp own stock (even a controlling number of shares) in DRI, there is no legal presumption that references to DRI or its policies or practices are impliedly references to Mr. Griggs or Mr. Sharp. Should there be continuing concern in that regard, an appropriate jury instruction can be proffered.
The currently-set trial anticipated all charges against all Defendants. It is set for 6-8 weeks beginning July 2, 2012. In the event of severance of trials, the Defendants prefer to proceed with the charges against Mssrs. Griggs, Blackburn and Sharpe before trial of the charges against the remaining Defendants. The Government has no preference. To take advantage of the time currently set for trial and in anticipation of a longer trial for the charges against Mssrs. Griggs, Blackburn, Sharpe and Travers than for those against Mssrs. Kaskel and Troudt, the trial beginning July 2, 2012, will be used for charges against Mr. Griggs, Mr. Sharp, Mr. Blackburn, and Mr. Travers.
Trial on the charges against Mr. Kaskel and Mr. Troudt will proceed thereafter. In their motions for severance, each included arguments suggesting that they cannot be tried together. The Court treats such requests as pending motions for separate trials. Counsel for the Government, Mr. Kaskel and Mr. Troudt shall contact this Court's chambers within ten days of the issuance of this memorandum opinion to set a law and motion hearing to address trial matters for these Defendants, including scheduling, Speedy Trial issues, and further severance requests.