U.S. v. Nicholas
| Citation | 594 F.Supp.2d 1116 |
| Decision Date | 29 December 2008 |
| Docket Number | Case No. SACR 08-00139 CJC. |
| Parties | UNITED STATES of America, Plaintiff, v. Henry T. NICHOLAS, III and William J. Ruehle et al., Defendants. |
| Court | U.S. District Court — Central District of California |
Robb Christopher Adkins, Gregory W. Staples, Andrew D. Stolper, AUSA—Office of U.S. Attorney, Criminal Division, Santa Ana, CA, for Plaintiff.
Jack P. DiCanio, Lavanya Mahendran, Richard Marmaro, Matthew Eric Sloan, Matthew Donald Umhofer, Skadden Arps Slate Meagher and Flom LLP, Los Angeles, CA, Kevin M. Downey, Malachi B. Jones, Tobin J. Romero, Barry S. Simon, Brendan V. Sullivan, Jr., Negar Tekeei, Lance A. Wade, Marcie R. Ziegler, Williams and Connolly LLP, Washington, DC, James D. Riddet, Stokke and Riddet, Santa Ana, CA, for Defendants.
ORDER DENYING DEFENDANT'S MOTION TO SUPPRESS PRIVILEGED EMAIL AND GRANTING GOVERNMENT'S APPLICATION TO DISCLOSE PRIVILEGED EMAIL
Defendant Henry T. Nicholas, III ("Dr. Nicholas") and the government have filed competing motions regarding an email entitled Brett's Home Run ("Email") that Dr. Nicholas sent to his estranged wife, Stacey, from his Broadcom email account. In the Email, Dr. Nicholas admits to engaging in certain misconduct and making various misrepresentations in his capacity as CEO of Broadcom. Five years after Dr. Nicholas sent the Email, the government became aware of the Email during its 2007 criminal investigation of Dr. Nicholas and the stock option granting practices at Broadcom. In the course of the government's investigation, Broadcom representatives provided the Email to the government. Soon after learning that the government had a copy of the Email, Dr. Nicholas asserted that the Email was a privileged marital communication and demanded that the government return the Email to him. The government refused and maintained that the Email was not a privileged communication. Ultimately, the parties requested that the Court resolve this dispute, and the Court found that the Email was not a privileged communication. However, the Ninth Circuit reversed, holding that the Email was a privileged marital communication, but did not require that the government return the Email to Dr. Nicholas.
Dr. Nicholas now moves to preclude the government from disclosing the Email to Dr. Nicholas' co-defendant William J. Ruehle ("Mr. Ruehle") and from using the privileged Email for cross-examination or impeachment of Dr. Nicholas should he testify at trial. The government opposes Dr. Nicholas' motion and moves for permission to disclose the Email to Mr. Ruehle so he can prepare his defense to the charges against him. The government also believes the Court's ultimate decision regarding the parties' competing motions should be made public.
After carefully considering the evidence presented by the parties and the arguments of their counsel, the Court believes that the Email must be disclosed to Mr. Ruehle. As the Ninth Circuit recognized, the Email may be admissible at trial notwithstanding the privilege. The government may be able to use the Email to impeach Dr. Nicholas should he give exculpatory testimony at trial that contradicts the incriminating statements in the Email. The Court may allow the government to use the Email for impeachment purposes as the jury's interest in finding the truth may outweigh Dr. Nicholas' confidentiality in a troubled marriage. The incriminating statements in Dr. Nicholas' Email may also be admissible against Mr. Ruehle as a co-conspirator admission should the government establish that Dr. Nicholas made the incriminating statements during and in furtherance of the alleged conspiracy charged against Dr. Nicholas and Mr. Ruehle. Under Rule 801(d)(2)(E) of the Federal Rules of Evidence, statements made by one co-conspirator to conceal an ongoing conspiracy are deemed to be in furtherance of the conspiracy and are imputed admissions of another co-conspirator. Given the possibility that Dr. Nicholas' incriminating statements in the Email may be admissible at trial, Mr. Ruehle must be advised of that possibility and be provided a copy of the Email so he can adequately prepare his defense.
The Court also believes that this order regarding the Email should be made public. Transparency is the hallmark of a fair and equitable system of justice, and as the Ninth Circuit has held, "[t]he presumption of openness ... is at the foundation of our judicial system." CBS, Inc. v. District Court, 765 F.2d 823, 825 (9th Cir.1985). Numerous people at Broadcom and within the government know of the Email's existence and its contents. Likewise, the Orange County Register has publicly reported on the Email and disclosed many of its contents. Under these circumstances, there is no compelling interest to keep the Court's order regarding the Email under seal. The Court cannot keep secret what is already public.
In April 2002, Dr. Nicholas composed and sent the Email to his then-wife, Stacey, from his Broadcom email account, using his company laptop. The eighteen-paragraph email discusses the Nicholas' children, the breakup of the Nicholas' marriage, Dr. Nicholas' drug use, and various issues related to Broadcom. (Id.) Dr. Nicholas details business decisions made in his capacity as CEO of Broadcom. In one paragraph, Dr. Nicholas admits:
I am still suffering the effects of going "cold turkey" [off drugs] but I'm getting better. The worst part is seeing the company falling apart because I am not fully functioning. However, I don't care about Broadcom anymore, I just feel like a liar to the people I am recruiting into new positions ... because I am potentially fucking some things up this week that will be irreparably damaging. Fortunately, those results take at least a year to show up on our financial performance. However, I am willing to lie and bullshit to get key people in place so that I can extract myself from Broadcom as soon as possible.
(Id.) Dr. Nicholas also details his drug use and the effects thereof. (Id.) After ending his drug use "cold turkey," Dr. Nicholas writes that he experienced "`panic attacks'" and "`electric shock' like flashes" before and during a "wall-street conference call." (Id.) The Email concludes with a postscript in which Dr. Nicholas states that he will "not need [his then-wife's] help," but admonishes that "the things that effect [sic] my emotional fragility [around the time of the board and shareholder meetings] will affect a lot of other people (even you as a large shareholder)." (Id.)
Dr. Nicholas sent the Email from his Broadcom email account through the company server, using his company laptop. (Decl. of Robb Adkins and Andrew Stolper, Sept. 10, 2007 ("Adkins/Stolper Decl.") ¶ 6.) Dr. Nicholas chose not to apply password protection to his Broadcom laptop or otherwise limit unauthorized access, and approximately ten Information Technology ("IT") staff members had the capacity to access Dr. Nicholas' laptop. (Id. ¶ 9.) Dr. Nicholas also engaged in a regular practice of handing a cloned, unprotected copy of his laptop to his traveling staff, including his limousine driver, airplane pilot, and secretary. (Id. ¶¶ 11, 15.) Dr. Nicholas authorized several Broadcom employees to create back-up copies of his emails, which required the employee to open and compare emails with the back-up copy. (Id. ¶¶ 8-11; Def.'s Mot. Ex. 2 at 14.) Although emails sent from Dr. Nicholas' company laptop were not stored on the Broadcom server, Dr. Nicholas' sent items were backed up at regular intervals by Broadcom's IT staff. (Adkins/Stolper Decl. ¶¶ 8-10.)
In 2002, Timothy Duchene, a member of Broadcom's IT department, found the Email on Dr. Nicholas' laptop while he was engaged in the authorized maintenance and back-up of Dr. Nicholas' email account. (Id. ¶ 15.) Around the same time, Scott Smith, another member of Broadcom's IT department who worked closely with Dr. Nicholas, became concerned about Dr. Nicholas' erratic conduct and possible drug abuse. (Id. ¶ 5.) Mr. Smith brought these issues to the attention of Henry Samueli, Broadcom's Co-Chairman of the Board of Directors, who asked Mr. Smith to obtain more proof of Dr. Nicholas' conduct. (Id.) According to Mr. Smith, Dr. Samueli authorized Mr. Smith to obtain this information by "any means necessary"—including searching emails sent on the Broadcom server. (Id.) Mr. Smith, who knew of the existence of the Email, asked Mr. Duchene to retrieve a copy of it from a back-up of Dr. Nicholas' laptop. (Id.) Per Mr. Smith's request, Mr. Duchene retrieved the Email and gave a copy of it to Mr. Smith. (Id.)
Mr. Smith returned the copy of the Email to Mr. Duchene, but notified Broadcom's General Counsel, David Dull, of the existence of the Email. Mr. Dull then asked Dave Shaw, another member of the IT department, to retrieve a copy of the Email for him. (Id. ¶ 5.) Mr. Shaw provided Mr. Dull with a copy of the Email as well. (Id. ¶ 6.) Mr. Dull then gave Mr. Smith a copy of the Email, and Mr. Smith provided the Email to Dr. Samueli, a person identified as Aranoff, and another unidentified individual. (Id.) Mr. Smith also retained an electronic copy of the Email for his own personal records. (Id.) Upon reading the Email, Dr. Samueli became very concerned and asked Mr. Smith to make additional copies of the Email. (Id.)
During the summer of 2002, Broadcom's Director of Human Resources, Nancy Tullos, also learned of the Email's existence and directed Mr. Smith to retrieve the Email for her records. (Def.'s Mot. Ex. 2 at 17, Ex. 1 at 5.) Per Ms. Tullos' request, Mr. Smith sent a copy of the Email to Mr. Dull and Ms. Tullos. (Id.) Ms. Tullos then saved a copy of the Email to her hard drive. (Id. Ex. 2 at 17.)...
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