US v. Bailin, 89 CR 668.

• Decision Date: 29 January 1993
• Docket Number: No. 89 CR 668.,89 CR 668.
• Citation: 816 F. Supp. 1269
• Parties: UNITED STATES of America, Plaintiff, v. Robert H. BAILIN, et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

816 F. Supp. 1269

UNITED STATES of America, Plaintiff, v. Robert H. BAILIN, et al., Defendants.

No. 89 CR 668.

United States District Court, N.D. Illinois, E.D.

January 22, 1993.

On Motion for Stay January 29, 1993.

COPYRIGHT MATERIAL OMITTED

Daniel Gillogly, Lisa Huestis and Dean Polales, Asst. U.S. Attys., Chicago, IL, for U.S.

Joseph J. Duffy, Schiff, Hardin & Waite, Robert M. Stephenson, Alan D. Blumenthal, Allan A. Ackerman, Charles B. Sklarsky, Jenner & Block, Jeremy D. Margolis, Altheimer & Gray, David Stetler, McDermott, Will & Emery, Richard L. Manning, James Streicker, Chicago, IL, Robert L. Gevirtz, Northbrook, IL, for defendants.

MEMORANDUM OPINION AND ORDER

HART, District Judge.

This case presently involves 10 defendants charged in approximately 80 counts. The offenses all concern trading of yen futures at the Chicago Mercantile Exchange. Four defendants are charged with a conspiracy in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(d), but all 10 defendants as well as others who have previously pleaded guilty to charges are named as co-conspirators.¹ Two of the defendants are each charged with one count of a substantive violation of RICO. There are also charges of mail fraud and wire fraud, and various violations of the Commodity Exchange Act ("CEA"). Trial on the remaining counts is set for February 8, 1993.² Presently pending are a number of motions of the government and defendants.

Following a lengthy trial on almost 200 counts, a jury returned verdicts of not guilty on approximately two-thirds of those counts and hung on the counts that remain to be tried. In an order dated June 26, 1991, it was held that double jeopardy did not bar the retrial of any of the remaining counts, but that the government was estopped from again seeking to prove any of the acquitted counts constituted RICO predicate acts. One defendant and the government appealed and the Seventh Circuit affirmed. United States v. Bailin, 977 F.2d 270 (7th Cir.1992) ("Bailin"). Still unresolved is the question of whether evidence of the acts charged in the acquitted counts can be presented by the government at the second trial. See id. at 282 & n. 19. The government contends that such evidence is admissible as proof of the RICO conspiracy, proof of a scheme to defraud, or as other acts evidence under Fed. R.Evid. 404(b). In its motion for a pretrial ruling to admit certain evidence, the government summarizes the evidence of acquitted counts and other presently uncharged transactions that it intends to present at trial.³

The first issue to be addressed is the argument that the government is precluded from prosecuting the remaining counts. Count 2 of the indictment describes defendants' alleged scheme to defraud. These allegations are incorporated into all the mail and wire fraud counts of the indictment.⁴ It is contended that the jury's finding of not guilty on Count 2 constitutes a finding that the alleged scheme to defraud does not exist and therefore bars further prosecution of the remaining counts.⁵ All the mail and wire fraud counts incorporate the same scheme to defraud. Count 2, however, alleges that particular conduct involving a particular transaction constituted mail fraud by defendant Sidel that was part of the scheme to defraud. A finding of not guilty on Count 2 did not have to be based on a finding that the overall scheme to defraud did not exist; it could have been based on a finding that another element of mail fraud was missing for that particular mailing. See Bailin, 977 F.2d at 281-82. Therefore, the not guilty verdict on Count 2 is not a sufficient basis for applying double jeopardy or estoppel to dismiss the remaining counts against Greenfield or the remaining mail and wire fraud charges against the other defendants.

In Dowling v. United States, 493 U.S. 342, 110 S.Ct. 668, 107 L.Ed.2d 708 (1990), the Supreme Court clarified the standard for applying collateral estoppel in a criminal trial following a prior acquittal in a separate trial or separate case. The Supreme Court clarified that the issue sought to be precluded in the second trial must be an ultimate fact for the second trial, not merely an evidentiary fact. Id. at 348, 110 S.Ct. at 672. For collateral estoppel to apply, it must be shown by the party invoking the doctrine that (1) the two trials involve identical issues; (2) the evidence to be precluded was an ultimate fact necessarily decided in the first trial; and (3) the evidence is also an ultimate fact in the second trial. Bailin, 977 F.2d at 280-81. An ultimate fact is a fact that must be proven beyond a reasonable doubt. Id. at 280 (citing Note, Collateral Estoppel Effect of Prior Acquittals, 46 Brooklyn L.Rev. 781, 790 & n. 45 (1980)). "Ultimate facts are those facts so crucial to a proceeding that in reaching a final judgment the trier of fact must necessarily have determined their truth or falsity. By contrast, facts introduced for their cumulative value, but which are not required to be proved in order to support a final judgment, are deemed evidentiary or mediate in nature." 46 Brooklyn L.Rev. at 784.

The government presents three grounds for admitting acquitted evidence. The government contends the various transactions involved are all part of the conspiracy and therefore evidence related to the acquitted counts is direct evidence of the existence of the conspiracy charged against four of the defendants in Count 1. It also contends that the transactions are direct evidence of the scheme to defraud that is charged as part of the mail fraud and wire fraud counts. The government further contends that the evidence is admissible as other bad acts evidence to show intent, plan, or knowledge with respect to individual CEA counts. See Fed.R.Evid. 404(b).

Defendants argue that admitting this evidence as direct evidence would be use for proof of an ultimate fact. Count 1 charges four defendants with conspiring to commit "racketeering activity consisting of multiple acts of mail fraud in violation of the federal mail fraud statute ... and wire fraud in violation of the federal wire fraud statute ..., as more fully described in the indictment, which counts are incorporated by reference." At the first trial, the jury was instructed: "To prove a `pattern of racketeering activity' as alleged in Count 1, the government must prove agreement to commit at least two racketeering acts, as charged in the indictment...." Instruction 42. It was also instructed: "In relation to element four, `a pattern of racketeering activity' in Count 1, in order to find a defendant guilty, you must unanimously agree that the defendant agreed that one or more of the alleged conspirators would commit at least two particular charged racketeering acts in furtherance of the conspiracy." Instruction 43. Defendants contend that proof of the acquitted counts (at least the acquitted mail and wire fraud counts) would be proof of an ultimate fact since the government must prove an agreement to commit at least two charged racketeering acts. In the retrial, however, the jury will be provided with a redacted indictment. The jury will again be instructed⁶ that it must find an agreement to commit two racketeering acts charged in the indictment. The acquitted counts will no longer be charged in the indictment so they cannot be the racketeering acts referred to in the indictment and instructions. Instead, to the extent evidence of acquitted counts is permitted to be presented at the retrial as direct evidence, it will be cumulative proof supporting that a conspiratorial agreement or a scheme to defraud exists. It is the conspiratorial agreement itself or the scheme to defraud itself that is the ultimate fact that must be proven beyond a reasonable doubt, not the individual transactions that were charged in the acquitted counts. Since not evidence of ultimate facts, evidence of the acquitted counts is not evidence that the government is estopped from presenting in the retrial.

Even if the government were estopped from presenting the acquitted evidence as direct evidence, it would not be estopped from using the evidence as 404(b) evidence. Dowling, 493 U.S. at 348-50, 110 S.Ct. at 672-73, is controlling on that point and defendants do not contend otherwise. Some defendants contend that intent was not an issue they raised as a defense and therefore there is no purpose that would justify admitting the evidence under 404(b). While the emphasis of each closing argument varied from defendant to defendant, no defendant conceded that he had the necessary mental state to support all the charges against him. The government has the burden of proving beyond a reasonable doubt the necessary mental state for each remaining count. To the extent it is less of an issue for some counts, that would be weighed in the balance in determining whether particular 404(b) evidence should be admitted. There is, however, no defendant for whom state of mind is a nonexistent issue.

For the reasons stated, the government is not estopped from presenting evidence of the acquitted counts. That, however, does not fully resolve the question of whether the government will be permitted to present the evidence at the second trial. Admission of the evidence still must be found to be appropriate in accordance with Fed. R.Evid. 403 and/or 404(b). At the first trial, it was found that the large number of charges involved and the volume of evidence already available as to charged transactions strongly militated against admitting evidence of uncharged transactions except on a limited basis where the evidence was important to the government's case. It is within this court's discretion to exclude cumulative evidence. See Fed.R.Evid. 403.

This case still involves approximately 80 charged counts involving 40 or more separate transactions. In its motion, the government recites a number of uncharged transactions that were admitted...