U.S. v. Ferrarini

• Decision Date: 12 June 1998
• Docket Number: No. 97 CR. 950(DLC).,97 CR. 950(DLC).
• Citation: 9 F.Supp.2d 284
• Parties: UNITED STATES of America, Plaintiff, v. Donald FERRARINI, Bruno Rumignani, A. Michael Kagan, Howard Miller, and Everett Vieira, Defendants.
• Court: U.S. District Court — Southern District of New York

9 F.Supp.2d 284

UNITED STATES of America, Plaintiff, v. Donald FERRARINI, Bruno Rumignani, A. Michael Kagan, Howard Miller, and Everett Vieira, Defendants.

No. 97 CR. 950(DLC).

United States District Court, S.D. New York.

June 12, 1998.

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Mary Jo White, United States Attorney, Southern District of New York, New York, NY, Robert S. Khuzami, Assistant United States Attorney, for U.S.

Mitchell A. Golub, New York, NY, for Defendant Donald Ferrarini.

Larry H. Krantz, Krantz & Berman LLP, New York, NY, for Defendant Bruno Rumignani.

David M. Richman, New York, NY, for Defendant Donald Kagan.

Alan R. Kaufman, Buchwald & Kaufman, New York, NY, for Defendant Everett Vieira.

Richard D. Weinberg, Morvillo, Abramowitz, Grand, Iason, & Silberberg, P.C., New York, NY, for Defendant Howard Miller.

OPINION

COTE, District Judge.

This case, for which the Grand Jury returned an indictment on September 25, 1997, and a superseding indictment on January 8, 1998, concerns allegations of various crimes arising out of the operation of Underwriters Financial Group, Inc. ("Underwriters"), a publicly traded company which collapsed in the summer of 1995, and two of its subsidiaries, BRI Coverage Corporation and UFG International, Inc. (collectively "UFG"), through which Underwriters operated its insurance brokerage business. As an insurance broker, UFG, among other things, obtained insurance policies for its customers and arranged financing for customers to help them pay their insurance premiums. The defendants Donald Ferrarini, Bruno Rumignani, and Howard Miller served as President, Executive Vice-President, and Senior Vice President, respectively, of Underwriters and UFG, and defendant Everett Vieira was employed by UFG to perform various functions, including serving as a financial consultant. Defendant Michael Kagan was the Senior Vice President of CPF Premium Funding, Inc. ("CPF"), a company which loaned money through UFG to UFG's customers for the purpose of paying premiums. For the sake of simplicity, this Opinion will refer solely to Underwriters when describing the activities — many of which were undertaken through UFG — which are the concern of this indictment.

At the present time, the defendants in this action have separately filed motions seeking (1) severance of their trials pursuant to Rules 8 and 14, Fed. R. Crim. P., (2) the dismissal of certain counts in the indictment, and (3) the production of a Bill of Particulars and various evidence in the custody of the Government. For the reasons set forth below, the defendants' motions are denied.

I. BACKGROUND

The first count of the eighty-six count superseding indictment (hereafter, the "indictment") alleges a conspiracy, in which all of the defendants participated, with four objects: mail fraud, insurance fraud, securities fraud, and the making of false statements to the SEC. Put most simply, the defendants are charged with having fraudulently procured loans for Underwriters; misappropriated customers' premium payments; and misrepresented to the SEC Underwriters' financial condition, all in an effort to obtain badly needed operating funds for Underwriters and to disguise Underwriters' true financial condition.

The indictment charges that from June 1993 to April 1995, the defendants fraudulently obtained for Underwriters 37 loans totaling approximately $12.8 million from three finance companies, including CPF. In furtherance of this scheme, the indictment alleges that the defendants Ferrarini, Rumignani, Miller, and Vieira submitted phony finance applications to the lenders. Kagan allegedly abused his fiduciary position at CPF by accepting some $425,000 from Underwriters in order to induce CPF to approve the loans to Underwriters.

The defendants are further charged with having misappropriated customers' premium payments for legitimate loans. At the time Underwriters went out of business in 1995, it is alleged to have misappropriated over $6.0 million altogether in customer premiums owed to various insurance companies. According to the indictment, the defendants initially appropriated premiums which had been held for nine months or longer and thus appeared to have been overlooked. By 1993, Ferrarini, Rumignani, and Miller allegedly began to misappropriate current customers' payments as well as aged payments. The defendants' alleged recordation of the fraudulent loans and the misappropriated customer payments as income to Underwriters — and their concealment of the company's liability to repay those funds — on financial statements filed by Underwriters with the SEC give rise to the securities and false statements charges.

Each of the defendants also is charged with substantive crimes arising out of the conspiracy. Ferrarini, Rumignani, and Miller are charged with one count of securities fraud and six counts of making false statements to the SEC, the latter series of counts all being tied to filings of forms 10-K and 10-Q. Ferrarini and Rumignani are charged in thirty-seven counts with mail fraud in connection with the mailing of documents as part of the scheme to defraud premium finance companies. Vieira is named in two of those counts; Kagan in twenty-seven; and Miller in nineteen. Ferrarini and Rumignani are named in seventeen counts of insurance fraud connected to the embezzlement of funds belonging to Underwriters' customers. Finally, Rumignani, Vieira, and Miller are each charged with one count of making false statements to the United States Attorney's Office during its investigation of UFG.

Two of the defendants are charged with substantive crimes that are not directly related to the conspiracy. Kagan is charged with five counts of mail fraud for engaging in his own financing scheme in which he obtained fraudulent loans from CPF. Ferrarini is charged with thirteen counts of insurance fraud for his alleged embezzlement of approximately $456,600 of Underwriters' funds for his personal use, and three counts of tax evasion for failing to report the embezzled funds as income. The Government has consented to a severance of counts sixty-eight through eighty-three, the embezzlement and tax evasion charges against Ferrarini. Accordingly, these charges against Ferrarini will be severed and will not be discussed further. The Government therefore seeks to try the five defendants together on a seventy count indictment.

II. DISCUSSION

A. Severance

There is a preference in the federal system for the joint trial of defendants who have been indicted together. See United States v. Miller, 116 F.3d 641, 679 (2d Cir. 1997), cert. denied, ___ U.S. ___, 118 S.Ct. 2063, 141 L.Ed.2d 140 (1998). In order to prevail on a motion for severance, a defendant must demonstrate not simply that he will be prejudiced by a joint trial, but that "there is a serious risk that a joint trial would compromise a specific trial right of one of the defendants, or prevent the jury from making a reliable judgment about guilt or innocence." Zafiro v. United States, 506 U.S. 534, 539, 113 S.Ct. 933, 122 L.Ed.2d 317 (1993). Such risks occur, for example, when evidence admissible against one defendant alone leads a jury to conclude erroneously that another defendant is guilty or when "essential exculpatory evidence" is unavailable at a joint trial but available if a defendant is tried alone. Id. See also United States v. Walker, 142 F.3d 103, 110 (2d Cir. 1998).

In moving for separate trials, Kagan, Miller, and Vieira argue that they will be prejudiced by a joint trial because they were relatively minor players in the conspiracy. In addition, they argue that they will suffer from "spillover prejudice" on account of the evidence of other crimes that will be introduced against their codefendants. Kagan also argues that his trial must be severed from that of his codefendants because his defense requires their testimony, which will be unavailable at a joint trial. Finally, Ferrarini, Rumignani, Vieira, Kagan, and Miller all argue that they are entitled to a severance because their defenses are antagonistic with those of other defendants. Ferrarini seeks severance from Vieira; Vieira seeks severance from Ferrarini and Rumignani; Kagan seeks severance from all of the other defendants; and Miller and Rumignani seek severance from Kagan.

1. Severance for "Minor Players"

In support of his argument that he is a minor player in the conspiracy charged in the indictment and will be harmed through spillover prejudice, Kagan points out that he is named in thirty-three of the seventy counts in the indictment, and that there is no allegation that he had any involvement in the scheme to misappropriate insurance premiums from Underwriters' clients or the scheme to obtain premium finance loans from entities other than CPF. Vieira, in turn, points out that he is named in only four of the seventy counts, and also is not alleged to have been involved in the scheme to misappropriate insurance premiums from Underwriters' clients.¹ Miller, who is named in only twenty-eight counts, also claims that he will be prejudiced by a joint trial because he is alleged to have been a relatively small player in the conspiracy.

Summarizing the indictment's allegations against Kagan and Vieira, each of these two defendants is charged with conduct relating to UFG's obtaining insurance premium loans. Kagan, as an employee at CPF, recommended approval of the loans for which UFG applied, which resulted in CPF lending $ 9.38 million. Vieira, a financial consultant at UFG, assisted in obtaining such loans from both CPF and another entity, Imperial. On one or more occasions in February and March 1995, the indictment alleges that the five defendants met at Vieira's home to discuss UFG's increasingly desperate cash-flow situation and the premium finance loans UFG had obtained from CPF. Vieira also is accused of having made false statements about the premium finance loans obtained by UFG from...