524 F.3d 171 (2nd Cir. 2008), 05-3600, United States v. Rittweger

Docket Nº:05-3600-cr(L), 05-3766-cr(CON), 05-3769-cr(CON).
Citation:524 F.3d 171
Party Name:UNITED STATES of America, Appellee, v. Thomas Michael RITTWEGER, Victor M. Wexler, also known as "Fat Boy," also known as "Screw," Douglas C. Brandon, Defendants-Appellants.
Case Date:April 23, 2008
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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524 F.3d 171 (2nd Cir. 2008)

UNITED STATES of America, Appellee,

v.

Thomas Michael RITTWEGER, Victor M. Wexler, also known as "Fat Boy," also known as "Screw," Douglas C. Brandon, Defendants-Appellants.

Nos. 05-3600-cr(L), 05-3766-cr(CON), 05-3769-cr(CON).

United States Court of Appeals, Second Circuit.

April 23, 2008

         Argued: October 23, 2007.

         We hold that joinder of the charged conspiracies was permissible under Federal Rule of Criminal Procedure 8(b) because the indictment alleged that the conspiracies shared a common plan or scheme and a substantial identity of facts or participants. We also hold that the district court did not abuse its discretion in finding that no prejudice compelled severance under Federal Rule of Criminal Procedure 14. As the district court concluded, this was not a case in which there was any reasonable possibility that the jury could not follow the court's instructions and consider the case against each defendant separately. Further, although the government's failure to provide Brady materials earlier in the trial process is troublesome, its actions do not require reversal of defendant Douglas C. Brandon's conviction because there is no reasonable probability that the delay affected the outcome of the case or otherwise deprived Brandon of a fair trial. We therefore AFFIRM the defendants' convictions.

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         Frank Handelman, New York, NY, for defendant-appellant Thomas Michael Rittweger.

         Peter E. Fleming, Curtis, Mallet-Prevost, Colt & Mosle LLP, New York, NY, for defendant-appellant Victor M. Wexler.

         Thomas E. Engel, Engel, McCarney & Kenney LLP, New York, NY, for defendant-appellant Douglas C. Brandon.

         Andrew L. Fish, Assistant United States Attorney (Katherine Polk Failla, of counsel), for Michael J. Garcia, United States Attorney for the Southern District of New York, New York, NY, for appellee.

         Before: SOTOMAYOR, B.D. PARKER and HALL, Circuit Judges.

         SOTOMAYOR, Circuit Judge.

         This appeal addresses whether the joinder of defendants under Federal Rule of Criminal Procedure 8(b) ("Rule 8(b)") is proper when the overwhelming evidence presented at trial concerned proof of a conspiracy that involved some, but not all, of the named defendants. Because the indictment alleged the existence of two conspiracies that shared a common plan or scheme and a substantial identity of facts or participants, we hold that joinder was permissible under Rule 8(b). We further hold that, in light of the relatively straightforward nature of the evidence at issue and the district court's careful limiting instructions to the jury, defendants Victor M. Wexler and Douglas C. Brandon failed to meet the heavy burden of persuasion to reverse a trial court's decision not to grant severance under Federal Rule of Criminal Procedure 14 ("Rule 14").

         This appeal also raises an issue of whether the government violated Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), when it failed to produce arguably exculpatory evidence with respect to Brandon until the week of trial. Although the government should have disclosed this evidence sooner, there is no reasonable probability that the delay affected the outcome of the case so as to require reversal of Brandon's conviction. We therefore AFFIRM the defendants' convictions.1

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         BACKGROUND

         The facts of this case as they relate to each defendant are set forth more fully in the district court opinion, familiarity with which is presumed. See United States v. Rittweger, 259 F.Supp.2d 275, 279-83 (S.D.N.Y. 2003).

         I. Indictment

         Defendants Thomas M. Rittweger ("Rittweger"), Douglas C. Brandon ("Brandon") and Victor M. Wexler ("Wexler"), together with Richard J. Blech ("Blech") and Robert S. DeHaven ("DeHaven"), were charged in a thirteen-count indictment returned on January 31, 2002. On April 9, 2003, the Grand Jury returned a superseding indictment (the "Indictment") against the defendants. Blech, however, pled guilty to the original indictment and was named only as a co-conspirator in the superseding indictment.

         II. Schemes Alleged

         The Indictment sets forth two schemes. Counts One through Eight allege the "First Scheme," which includes charges of: conspiracy to commit securities fraud and wire fraud in violation of 18 U.S.C. § 371; securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff, 17 C.F.R. § 240.10b-5, and 18 U.S.C. § 2; and wire fraud in violation of 18 U.S.C. §§ 1343, 1346, and 2. Counts Nine through Thirteen allege the "Second Scheme," which includes charges of: conspiracy to commit securities fraud, wire fraud, and commercial bribery in violation of 18 U.S.C. § 371; and using facilities of interstate commerce to carry on and facilitate commercial bribery in violation of 18 U.S.C. §§ 1952(a)(3) and 2.

         As part of the First Scheme, the Indictment alleges that from about 1996 through about 1999, Rittweger and Brandon, together with Blech and other co-conspirators, participated in a scheme to defraud customers of Credit Bancorp, Ltd. ("CBL")-a group of related United States and foreign business organizations that purported to provide "financial engineering" and investment services-of at least $210,000,000 by fraudulently inducing them to invest cash, securities, and other assets in two CBL investment programs: the "CBL Insured Credit Facility" and the "CBL Insured Securities Strategy." The customers did so in the expectation of receiving dividend payments and loans with favorable terms. The Indictment asserts that CBL was actually a Ponzi scheme, in which the proceeds from investments in the programs were paid to earlier investors to create the false appearance that the investments were profitable, thereby inducing additional customers to invest assets with CBL.

         The Indictment charges that in furtherance of the First Scheme, Rittweger and Brandon, together with Blech and other co-conspirators, made and caused others to make false and misleading representations to prospective customers. It further alleges that Rittweger, Brandon, and Blech falsely represented that Brandon would serve as a trustee on behalf of those customers who invested in the CBL Insured Credit Facility and would hold the invested

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assets in custodial accounts under his control. According to the Indictment, Rittweger, Brandon, and Blech knew that Brandon had neither control over the accounts into which the CBL customer assets were invested, nor the ability to fulfill his duties as trustee. Rittweger and Blech also allegedly misrepresented that assets invested in the CBL Insured Securities Strategy would be placed in mutual funds and other financial instruments, when they knew that a substantial portion of the assets were used to pay for unauthorized business and personal expenses instead.

         The Second Scheme involves Rittweger, Wexler, and co-conspirator DeHaven, who was an officer of Mitsui Trust Company ("Mitsui"), a Japanese financial institution. DeHaven worked in Mitsui's New York office and was responsible for Mitsui's participation in securities lending transactions. The Indictment alleges that DeHaven owed fiduciary and other duties of trust and honest services to Mitsui. The Indictment asserts that Wexler, a personal friend of DeHaven, referred potential customers to CBL in return for payments from CBL, and also managed a foreign exchange trading business affiliated with CBL.

         With respect to the Second Scheme, the Indictment further alleges that from about 1997 through 1999, Rittweger, DeHaven, and Wexler, together with Blech and other co-conspirators, participated in a scheme to defraud customers by inducing them to invest cash, securities, and other assets in the CBL Insured Credit Facility. In furtherance of this scheme, the conspirators allegedly made and caused others to make numerous false and misleading representations, including the claim that Mitsui had invested securities worth approximately $50,000,000 or more with CBL, when they knew that Mitsui had made no such investment.

         III. Jury Verdict

         After a seven-week trial before the United States District Court for the Southern District of New York (Koeltl, J.) that ended on June 26, 2003, the jury returned the following verdicts...

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