People v. Gilman
| Decision Date | 02 July 2010 |
| Docket Number | No. 4800–2009.,4800–2009. |
| Citation | 2010 N.Y. Slip Op. 51379,28 Misc.3d 1217,957 N.Y.S.2d 638 |
| Parties | The PEOPLE of the State of New York, v. William GILMAN and Edward McNenney, Defendants. |
| Court | New York Supreme Court |
OPINION TEXT STARTS HERE
Andrew Cuomo, NYS Attorney General's Office, New York City (Hannah Stith Long of counsel), for the People.
Proskauer Rose, LLP, New York City (Richard L. Spinogatti and Robert J. Cleary of counsel), for defendant William Gilman.
Cooley Godward Kronish, LLP, New York City (Scott D. Devereaux of counsel), for defendant Edward McNenney.
William Gilman and Edward J. McNenney, two former executives of Marsh & McLennan Cos., have filed a motion, pursuant to CPL § 440.10, to vacate their February 20, 2008 judgments of conviction on a Donnelly Act violation (GBL §§ 340, 341). In their motion, defendants assert that the People failed to comply with the mandates of Rosario1, Giglio2 and Brady3.
I. Factual and Procedural HistoryA. Case Overview
Defendants were executives and employees attached to the Excess Casualty Unit of Marsh Global Broking, a subsidiary of Marsh, Inc., a leading insurance broker. William Gilman was the executive marketing director and Edward J. McNenney was the global placement director for the company. Following a 2004 investigation by the New York State Attorney General (“NYAG”), defendants and six other Marsh Global Broking, Inc. brokers were indicted.4 The indictment charged the defendants with four counts of Grand Larceny in the First Degree (PL § 155.42, class B felonies), thirty counts of Grand Larceny in the Second Degree (PL § 155.40[1], class C felonies), one count of Grand Larceny in the Third Degree (PL § 155.35, a class D felony), one count of Scheme to Defraud in the First Degree (PL § 190.65[1][b], a class E felony)and one count of violating the Donnelly Act ( Gen. Bus. Law §§ 340, 341). 5 The Donnelly Act count charged:
“The defendants, during a period from about November 1998 to about September 2004, in the County of New York and elsewhere, acting with others unknown to the Grand Jury, knowingly and intentionally entered into and engaged in a contract, agreement, arrangement and combination in unreasonable restraint of trade and competition, to wit, to restrain competition in the sale of excess casualty insurance by means of bid rigging, price fixing and customer allocation.”
The People alleged that defendants devised and implemented an illegal anti-trust conspiracy to fraudulently obtain millions of dollars for Marsh and its accomplice insurance companies by rigging the market for excess casualty insurance. Marsh employees were alleged to have falsely represented to their corporate customers, including IBM, Cisco Systems, Fortune Brands, Intel, Merle Norman Cosmetics, Signature Fruit Company and Vivendi Universal, that they had solicited bids in an open and competitive bidding process. The defendants, according to the prosecution, however: identified which insurance company would win the business; set a target for the pre-determined winner to submit as its bid and; obtained losing bids from accomplice insurance companies. The losing bids were referred to as “B quotes,” “back up quotes,” “Bs,” “fake quotes,” “protective quotes” or “alternatives.”
B. The People's Case
It was the People's theory that competing insurance carriers engaged in a horizontal conspiracy to restrain trade purportedly facilitated by Gilman and McNenney. The defendants allegedly protected chosen insurance carriers from competition, guaranteed them a profit, and charged them a contingency fee based on how much business the carriers received from Marsh.
As part of the discovery in this case, more than 20 million pages of files, records and emails were exchanged. The defendants proceeded to a non-jury trial. The trial lasted from April 10, 2007 through February 20, 2008. At trial, the People elected to prosecute twenty-two of the thirty-five indicted grand larceny counts. The People's direct evidence included twelve Marsh Global Broking brokers and seven underwriters from American International Group (AIG), Zurich Insurance (Zurich), ACE USA (Ace) and Liberty International Insurance Company (Liberty) who confessed to and described their participation in the scheme, emails, meeting notes and the testimony of three outsiders unsuccessfully solicited to join the alleged scheme. Other witnesses, representing Marsh clients, also testified at trial
On February 20, 2008, the defendants were convicted of the Donnelly Act violation, a class E felony. Other charges were dismissed or resulted in an acquittal. The defendants jointly appealed to the Appellate Division, where the appeal is currently pending. As grounds for reversal, defense counsel argued there was no proof of a horizontal conspiracy to restrain trade. Defendants have remained at liberty during the pendency of the appeal.
The defendants allege that in May 2009, during a later trial of three previously severed defendants 6, they discovered that NYAG failed to produce, or disclose, multiple forms of material exculpatory and impeaching evidence. On June 11, 2009, defense attorneys requested all non-disclosed materials (Spinogatti affirmation, exhibit 25). On August 4, 2009, the defendants submitted and filed a CPL § 440.10 motion. Supplemental defense motion papers were submitted on October 21, 2009 and November 4, 2009, and reply papers were submitted January 11, 2010. Oral argument was heard on January 20,2010. Supplemental materials were filed by defendants on February 2, 2010 and by the People on March 31, 2010.
The alleged undisclosed material falls in six categories: (1) approximately 700,000 pages of documents from the files of Liberty which, allegedly, belie the People's theory of the case and the testimony of two key witness for the prosecution; (2) prior testimony at four depositions by three cooperating witnesses in related proceedings; (3) prior deposition testimony in a related proceeding, of which the People were aware, by a non-testifying witness which is allegedly exculpatory; (4) testimony by two cooperators in related proceedings given while the criminal trial was underway, but subsequent to the witness testifying at the criminal trial; (5) a prior conviction, known to the People, for driving while impaired by a witness whose sobriety was at issue; and finally (6) alleged hidden promises of leniency for cooperators beyond those contained in their written cooperation agreements.
At the heart of the prosecution's case was the theory that Liberty, along with other insurance companies, entered into a horizontal conspiracy to fix prices, bid rig and allocate customers. Marsh, while not an insurance carrier, facilitated this illegal arrangement at the instruction of, and through the actions of, the defendants. At the direction of the Court, and voluntarily in the interest of proceeding in an orderly fashion, NYAG agreed to make available documents from the files of the insurers relevant to the transactions which became the subject of the People's proof at trial. Simultaneous with the criminal investigation in this case, NYAG also brought actions for civil enforcement, disgorgement and penalties against Marsh, AIG, Liberty and others. In October, 2007, midway through the trial, the Investment Protection Bureau of NYAG, in State of N.Y. v. Liberty Mutual Insurance Co., (Sup Ct, N.Y. County, index No. 06–401726), obtained over 700,000 pages of discovery from the files of Liberty Mutual. This action for civil penalties under the Martin Act charged the same conduct as the criminal case. The files contained information directly relevant to the testimony of two cooperators in the criminal trial, Jason Monteforte and Kevin Bott. The existence of these files surfaced at the second trial in 2009. In particular, the defense claims that the files directly refute claims by Bott and Monteforte regarding pricing plans, efforts to prepare complete bids and carrier appetite. As well, the defense had maintained that the bidding process used by Marsh was standard in the industry, used by other brokers, and known to clients, challenging the allegations of a fraudulent scheme. Defendants point to documents within the undisclosed files which support that thesis.
There was some level of coordination between the sections of the Attorney General's office as evidenced, for example, when Elizabeth Nochlin (one of the lead prosecutors) personally filed a request for a protective order in the civil action on October 17, 2007, approximately the same time the Liberty files were produced to IPB. The prosecution contends it took no steps to review the files, although the People acknowledge that nothing prevented access to the documents and that “the IPB team would have been permitted to disclose the documents to the CPB” ( Long affirmation, March 31, 2010, at 8).
The materials were not turned over or disclosed to the defense at trial by the prosecution. Almost eighteen months later, the following materials were turned over to defense counsel:
REDACTED MATERIAL
These documents were potentially favorable to defendants. While the parties disagree about the exculpatory weight of the documents, the words of the Court of Appeals in People v. Banch, 80 N.Y.2d 610 (1992), while discussing Rosario, ring as true here: “[T]he potential impeachment value of a witness' prior statement [is] best ... determined by the “single-minded counsel for the accused” [citing Rosario ] and ... the trial court's evaluation [is] an inadequate substitute” ( Id., at 613).
Defendants argue that these documents contradict NYAG's central premise that the horizontal agreement was an incumbent protection scheme that inflated premium prices. Under the alleged scheme, the insurance carriers should...
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Gilman v. Marsh & McLennan Cos.
...but a probability that its disclosure would have produced a different result.” People v. Gilman, 2010 WL 3036983, at *19, 28 Misc.3d 1217(A), 2010 N.Y. Slip Op. 51379(U) (N.Y.Sup.Ct.2010). Specifically, the trial court stated that, “[o]bjectively viewed, the verdict here rested firmly upon ......