US v. Buchanan, Crim. No. 95-10188-NG.
| Decision Date | 04 June 1996 |
| Docket Number | Crim. No. 95-10188-NG. |
| Citation | 930 F. Supp. 657 |
| Parties | UNITED STATES of America, v. Edward S. BUCHANAN, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
Francis J. DiMento, DiMento & Sullivan, Boston, MA, for Defendant Edward S. Buchanan.
Anita S. Lichtblau, New England Bank Fraud Task Force, Boston, MA, William T. Clabault, Trial Attorney, New England Bank Fraud Task Force, Department of Justice, Boston, MA, for U.S.
MEMORANDUM AND DECISION RE: DEFENDANT'S MOTION FOR SEPARATE TRIALS
I. INTRODUCTION
The defendant, Edward S. Buchanan, has been charged with mail fraud, misapplication of bank funds, money laundering, wire fraud, currency structuring and conspiracy.1 The defendant moves under Rules 8(a) and 14 of the Federal Rules of Criminal Procedure to have some of the charges severed from the others.
As discussed below, I ALLOW the defendant's motion to sever and order that Buchanan be tried in separate trials for the offenses relating to his conduct as an officer of the Massachusetts Bank & Trust Company ("MassBank") and those relating to his role in the Canal Street Associates Limited Partnership. In making this determination, I am obliged to look at the language of Rules 8(a) and 14 of the Federal Rules of Criminal Procedure, which deal with joinder of separate offenses on a single indictment. To give context to this language, I will also look at other situations in which the law evaluates the relationship between two ostensibly different offenses, most notably where the question involves whether evidence of other "bad acts" is admissible under Rule 404(b) of the Federal Rules of Evidence.
The Indictment returned against Buchanan makes two sets of allegations: The first concerns Buchanan's role as Bank President of MassBank, alleging that he abused the trust of his office, concealed certain conduct from bank directors and flaunted federal banking laws, to the detriment of the bank and for his own benefit. The second concerns Buchanan's role as a principal in a real estate partnership, charging that Buchanan, unknown to his partners, made certain loans and defrauded the partnership, this time to the detriment of the business and for his personal benefit.
The defendant has moved for separate trials under Fed.R.Crim.P. 8(a) and 14.2 He proposes that charges relating to his alleged misconduct as President of MassBank, be severed from the charges relating to his allegedly criminal conduct as a principal of Canal Street Associates Limited Partnership.
Buchanan argues that, in the first instance, joinder of these two groups of offenses is not permitted under Fed.R.Crim.P. 8(a), and that, in any event, the two groups of offenses should be severed, since a single trial on both would unfairly prejudice the defendant. Fed.R.Crim.P. 14.
The government disagrees, arguing that joinder is not only permissible but wise. It contends that the purpose of each scheme was to enrich Buchanan by defrauding others, that the modus operandi for each scheme was fraud and that each involved the defendant's abuse of his position of trust at MassBank: all factors that render initial joinder of the charges proper. Further, the government argues that severance is not called for since no unfair prejudice is likely to result from joinder and judicial economy weighs in favor of trying the case as a whole.
I am not persuaded by the government's characterization of its case.
II. SUMMARY OF THE FACTS
The facts recited are culled from the Superseding Indictment returned against Buchanan on November 29, 1995.
Defendant Edward Buchanan was the president and chief executive officer of MassBank.3 He had held this position since 1971, and his duties included serving as chairman of the Bank's Board of Directors.4 Buchanan also owned over 99% of the bank stock and he owned and controlled the 245 Trust, a realty trust which in turn owned the building in which the MassBank headquarters were located.
Beginning no later than May 28, 1986, the Board was required to approve all disbursements of Bank funds and remuneration to Buchanan and his related interests. Apparently this approval process involved the Board's consideration of the purpose and ultimate beneficiary of the disbursements and any benefit to MassBank from the expenditure. In addition, Buchanan was required to provide the Board with documentation with respect to his business expenses exceeding a certain amount.
According to the Indictment, Buchanan did not comply with these requirements. To the contrary, it is alleged that beginning in or about June of 1986 and continuing through in or about May of 1991, Buchanan conspired to misapply bank funds in two related schemes. First, the Indictment charges that Buchanan intentionally misdirected bank funds to pay for certain personal and family expenses, including purchasing cars,5 investing in a yacht,6 paying full-time salaries to family members and crew members of the yacht who did not perform any services or inconsequential services for the Bank.7 Second, it is alleged that Buchanan illegally pocketed $50,000 of MassBank funds, received in settlement from a legal malpractice 1992 lawsuit brought by MassBank, Buchanan and former MassBank Vice President Jerome Harriman against the Bank's former law firm. According to the Indictment, without the knowledge or consent of MassBank's Board of Directors, Buchanan took the $50,000, laundered the money and structured various deposits and transactions to avoid reporting requirements.
The Indictment contains other allegations as well. Buchanan was a principal in Canal Street Associates Limited Partnership (CSA), a partnership Buchanan formed with two other business associates in 1985 for the purpose of purchasing and managing a large industrial mill complex located in Lawrence, Massachusetts.8 It is alleged that, beginning in 1990 and continuing through December 1993, Buchanan intentionally devised a scheme to defraud his CSA partners and to enrich himself and his family.
Apparently, upon refinancing the loan used to purchase the partnership property in Lawrence, through Haymarket Co-operative Bank in Boston, Massachusetts, Haymarket advanced CSA about $1,750,000 to pay off CSA's prior debt. Haymarket advanced an additional $700,000 in loan proceeds to CSA. With the approval of all partners, CSA placed about $400,000 of the proceeds in a certificate of deposit (CD) at MassBank, in the partnership name. The partners all agreed that the funds in the CD would be used to cover expenses and any operating deficiencies.
According to the Indictment, Buchanan, acting without knowledge or authorization of his two other partners, took $500,000 from the CSA/CD and extended a loan, on an unsecured basis, to a MassBank customer.9 The loan was repaid, with the funds deposited into another MassBank CD.
It is further alleged that Buchanan orchestrated a loan between CSA and his wife, Linda Buchanan, without the prior knowledge or authorization of his partners. His wife executed a promissory note with respect to the loan, and on or about April 24, 1991, Buchanan transferred $500,000 of CSA funds from a certificate of deposit bearing the partnership name at MassBank ultimately to an account in Florida in the name of "Edward S. Buchanan, P.O.A. Linda Buchanan." Additionally, Buchanan is alleged to have drawn $40,000 from CSA funds at Baybank to assist his daughter in starting a business wholly unrelated to the business of CSA. It is alleged that Buchanan concealed all this activity from his partners by creating misleading financial statements. Finally, it is alleged that Buchanan laundered the proceeds of these transactions through various accounts.
III. ANALYSIS
The defendant does not question the appropriateness of a single trial on all the charges related to Buchanan's conduct as MassBank President, that is on Counts I-VII and XVI through XXV.10 His challenge focuses instead on the joinder of the counts related to his conduct as MassBank President with the counts related to his role as a principal in Canal Street Associates Limited Partnership, requesting that Counts VIII through XV, be tried separately. The defendant argues that the initial joinder is improper, under Rule 8(a); and that, in any event, Rule 14 demands that the counts be severed to avoid substantial prejudice to the defendant.
I shall address each of defendant's challenges in turn.11
In deciding a defendant's motion for separate trials, my initial inquiry focuses on the language of Fed.R.Crim.P. 8(a), which provides the outer boundaries of what crimes may be charged in the same indictment, or charged in a single trial against a single defendant.12 Joinder is permitted where the offenses charged are: (1) based on the same act or transaction; (2) based on two or more acts or transactions connected together or constituting parts of a common scheme or plan; or (3) based on two or more acts or transactions of the same or similar character.13
Rule 8 contemplates joinder in a range of circumstances, from those situations in which the relationship between and among offenses charged is clear — and the events pertaining to each inextricably tied to the others — to those circumstances in which the offenses are fairly discrete but sufficiently linked in fact and in character to permit a single trial.
It is the lower end of the range that line drawing between permissible and improper joinder sometimes becomes imprecise and the standards applied confusing.
To give form to what is permissible at the lower end of the range contemplated by Rule 8, courts are directed to examine "whether the charges are laid under the same statute, whether they involve similar victims, locations, or modes of operation, and the time frame in which the...
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