United States v. Melvin

• Citation: 143 F.Supp.3d 1354
• Decision Date: 10 November 2015
• Docket Number: Criminal Action No. 3:14–cr–00022–TCB.
• Parties: UNITED STATES of America v. Thomas D. MELVIN, C. Roan Berry, Michael S. Cain, and Joel C. Jinks, Defendants.
• Court: U.S. District Court — Northern District of Georgia

143 F.Supp.3d 1354

UNITED STATES of America

v.Thomas D. MELVIN, C. Roan Berry, Michael S. Cain, and Joel C. Jinks, Defendants.

Criminal Action No. 3:14–cr–00022–TCB.

United States District Court, N.D. Georgia, Newnan Division.

Signed Nov. 10, 2015.

Douglas White Gilfillan, Nathan Parker Kitchens, Office of United States Attorney, Atlanta, GA, for Plaintiff.

ORDER

TIMOTHY C. BATTEN, SR., District Judge.

This case comes before the Court on Defendants' objections to Magistrate Judge Russell G. Vineyard's non-final report and recommendation [99], recommending denial of Defendants' motions to sever [40 & 53] and motions to strike surplusage [42, 54 & 56–1], and his final report and recommendation [118], recommending denial of Defendants' pending motions to dismiss the indictment and motion to suppress evidence [46, 48, 51, 57, 71, 75, 80, 82, 84 & 86]. Also before the Court are Berry's motion for reconsideration of Judge Vineyard's ruling on his motion for a bill of particulars [104] and Cain's motion for a speedy trial [43], motion to expedite the trial date [88], and supplemental motion to sever [137].

I. Background

On December 2, 2014, a grand jury returned an indictment against Defendants Thomas D. Melvin, C. Roan Berry, Michael S. Cain, and Joel C. Jinks, charging seven counts of securities fraud in violation of 18 U.S.C. §§ 1348

and 2. The indictment alleges that from about December 4, 2009 through January 14, 2010, Defendants knowingly and willfully executed and attempted to execute "a scheme and artifice (1) to defraud other persons in connection with stock securities of Chattem, Inc. and (2) to obtain, by means of false and fraudulent pretenses, representations, and promises, money and property in connection with the purchase and sale of stock" of Chattem, Inc. [1] at ¶ 1.

According to the indictment, Defendant Melvin was a certified public accountant licensed in Georgia and a partner in the accounting firm of Melvin, Rooks & Howell in Griffin, Georgia. He served as the personal accountant for Defendants Berry, Cain, and Jinks. Berry and Jinks were small-business owners, and Melvin maintained a close personal friendship with each of them and provided accounting services to them and their businesses. Cain was a senior vice president at Morgan Stanley Smith Barney, and in connection with this position he was a securities broker who traded securities on behalf of himself and his clients. Melvin served as Cain's accountant for personal tax services, and Cain and Melvin referred clients to each other. Cain also managed the retirement accounts of Melvin, Rooks & Howell.

According to the indictment, Chattem, an over-the-counter pharmaceutical manufacturer, was a public company whose stock was traded on the NASDAQ stock market. Chattem's securities were registered with the U.S. Securities and Exchange Commission (the "SEC") pursuant to Section 12(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), and it was required to file reports with the SEC pursuant to Section 15(d) of the Exchange Act.

Around late 2009, Chattem entered into discussions with Sanofi–Aventis, a French pharmaceutical company, regarding Sanofi's potential acquisition of Chattem. Around November 2009, Chattem's board of directors held a series of confidential meetings in which they discussed Sanofi's proposed acquisition of Chattem at a price of over $90 per share.

Melvin provided accounting services to one of Chattem's board members who was present in the November 2009 board meetings. Around December 4, 2009, this board member met with Melvin to obtain personal tax advice, and during this meeting the board member provided confidential information about the transaction, including the approximate time of the deal and information from which the likely acquisition price was apparent. The board member told Melvin that the information discussed during their meeting was confidential. The indictment states that the Georgia State Board of Accountancy prohibits accountants from disclosing confidential information obtained in the course of performing professional services without client consent.

According to the indictment, Melvin disclosed material, nonpublic information (referred to in the indictment as "Inside Information") regarding Sanofi's planned acquisition of Chattem to Berry, Cain, Jinks, and another person ("Person A") who worked at Melvin's accounting firm. The indictment alleges that Melvin made this disclosure "for his own personal benefit and in violation of duties of trust and confidence, with the understanding that the Inside Information would be used for the purpose of purchasing or selling securities." [1] at ¶ 4. It alleges that Berry, Cain, Jinks, and Person A, "aided and abetted by" Melvin, "carried out the scheme and artifice to defraud by misappropriating Inside Information of Chattem's, knowing that" Melvin had disclosed it "in violation of duties of trust and confidence" that he owed to his clients, so that Berry, Cain, Jinks, and Person A "could execute and cause the execution of securities transactions on the basis of the Inside Information." Id. at 5. Berry, Cain, Jinks, and Person A "in turn executed and caused to execute transactions in Chattem's securities on the basis of the Inside Information provided by" Melvin "for their own benefit through personal online brokerage accounts." Id. at 6.

On December 21, 2009, Sanofi publicly announced that it was acquiring Chattem in a $1.9 billion cash deal. Chattem's stock price increased by approximately 33%, rising from $69.98 per share at closing on December 20 to $93.50 per share at closing the next day. According to the indictment, Berry, Cain, Jinks, and Person A "sold their Chattem shares after the merger was publicly announced, thereby earning illegal profits." Id. The indictment charges seven counts of securities fraud, corresponding to seven separate transactions in Chattem stock between December 4, 2009 and December 15, 2009. Count one charges Melvin in connection with a purchase of shares on December 10, on behalf of Person A. Count two charges Berry and Melvin in connection with a purchase of shares on December 7. Counts three through six charge Cain and Melvin in connection with purchases of shares on December 4, 7, 11, and 15. Count seven charges Jinks and Melvin in connection with a purchase of shares on December 11.

Defendants object to Judge Vineyard's recommendation that the following motions be denied: (1) motions to sever filed by Cain and Berry, (2) motions to strike surplusage filed by Cain, Berry, and Jinks, and (3) motions to dismiss the indictment on various grounds filed by Melvin, Berry, and Jinks.¹ Each category of motions will be addressed separately below in the context of Defendants' objections to the R & Rs. Cain's other pending motions will be addressed in the context of the motions to sever. The Court will also address Berry's motion for reconsideration of the magistrate judge's ruling on his motion for a bill of particulars.

II. Legal Standard for Review of an R & R

A district judge has a duty to conduct a "careful and complete" review of a magistrate judge's R & R. Williams v. Wainwright, 681 F.2d 732, 732 (11th Cir.1982)

(quoting Nettles v. Wainwright, 677 F.2d 404, 408 (5th Cir. Unit B 1982) ).² This review may take different forms, however, depending on whether there are objections to the R & R. The district judge must "make a de novo determination of those portions of the [R & R] to which objection is made." 28 U.S.C. § 636(b)(1)(C). In contrast, those portions of the R & R to which no objection is made need only be reviewed for clear error. Macort v. Prem, Inc., 208 Fed.Appx. 781, 784 (11th Cir.2006).³

"Parties filing objections must specifically identify those findings objected to. Frivolous, conclusive or general objections need not be considered by the district court." Nettles, 677 F.2d at 410 n. 8

. "This rule facilitates the opportunity for district judges to spend more time on matters actually contested and produces a result compatible with the purposes of the Magistrates Act." Id. at 410

.

The district judge also has discretion to decline to consider arguments that were not raised before the magistrate judge. Williams v. McNeil, 557 F.3d 1287, 1292 (11th Cir.2009)

. Indeed, a contrary rule "would effectively nullify the magistrate judge's consideration of the matter and would not help to relieve the workload of the district court." Id. (quoting United States v. Howell, 231 F.3d 615, 622 (9th Cir.2000) ).

After conducting a complete and careful review of the R & R, the district judge may accept, reject or modify the magistrate judge's findings and recommendations. 28 U.S.C. § 636(b)(1)(C)

; Williams, 681 F.2d at 732. The district judge may also receive further evidence or recommit the matter to the magistrate judge with instructions. 28 U.S.C. § 636(b)(1)(C).

The Court has conducted a careful, de novo review of the R & Rs and Defendants' objections thereto. Having done so, the Court finds that Judge Vineyard's factual and legal conclusions were correct and that Defendants' objections have no merit.

III. Discussion

A. Motions to Sever

Pursuant to Rule 8(b) of the Federal Rules of Criminal Procedure

, an indictment may charge two or more defendants "if they are alleged to have participated in the same act or transaction, or in the same series of acts or transactions, constituting an offense or offenses." The rule specifies that "defendants may be charged in one or more counts together or separately. All defendants need not be charged in each count." Fed.R.Crim.P. 8(b). Courts look to the indictment to determine whether initial joinder is proper under Rule 8(b). United States v. Weaver, 905 F.2d 1466, 1476 (11th Cir.1990). "Rule 8 ‘is broadly construed in favor of the initial joinder.’ " Id. (quoting United States v. Davis, 773 F.2d 1180, 1181 (11th Cir.1985) ).

However, even if Rule 8

is satisfied, Rule 14(a) provides that if the joinder of defendants...