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UNITED STATES v. QUINTANILLA

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION


February 13, 1991

UNITED STATES OF AMERICA, Plaintiff,
v.
CARLOS QUINTANILLA, JOSEPH MONREAL, and LETICIA GUTIERREZ, Defendants

Suzanne B. Conlon, United States District Judge.

The opinion of the court was delivered by: CONLON

MEMORANDUM OPINION AND ORDER

Defendants Carlos Quintanilla, Leticia Gutierrez and Joseph Monreal are named in a forty-count indictment charging violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"); mail and wire fraud; transportation of stolen property in interstate commerce; conspiracy to defraud the Internal Revenue Service; money laundering; and various other offenses arising from essentially the same alleged course of conduct. Pursuant to Fed.R.Crim.P. 8(b) and 14, Quintanilla and Gutierrez move to sever Counts 27 through 40 of the indictment, which relate solely to Quintanilla's alleged scheme to defraud the City of Chicago of Job Training and Partnership Act ("JTPA") funds. In addition, Quintanilla and Gutierrez move to strike all references to the JTPA scheme from all counts except Counts 27 through 40.

 BACKGROUND

 The forty-count indictment presents a complicated array of alleged criminal acts committed by the three defendants in various combinations. However, the case essentially involves an alleged scheme by Monreal, Quintanilla and Gutierrez to defraud the G. Heileman Brewing Company ("Heileman") of over $ 700,000. The following is a summary of the factual allegations relevant to the court's disposition of this severance motion.

 Monreal served as director of Heileman's Hispanic Market Development for several years beginning in September 1984. As part of its marketing efforts, Heileman awarded sponsorship funds to various community group programs in Chicago and Milwaukee. Monreal was responsible for screening funding requests from various community groups, and making preliminary recommendations as to whether Heileman should award funds.

 Operation Search was an Illinois not-for-profit organization devoted to providing employment services to low and moderate income residents primarily residing in the Westtown and Humboldt Park communities of Chicago. Quintanilla served as executive director of Operation Search. Quintanilla controlled all aspects of Operation Search, including the organization's financial dealings.

 The indictment alleges that beginning in September 1983 and continuing through July 1987, Quintanilla, Monreal and Gutierrez conspired in a scheme to defraud Heileman of substantial sums of money designated for Heileman's sponsorship of community programs. *fn1" The co-defendants allegedly accomplished their scheme by submitting to Heileman several false and inflated funding requests on behalf of Operation Search and other Hispanic organizations. Each time Heileman awarded funds to Operation Search or these other organizations, Monreal received all or some of the money in kickbacks. Gutierrez and Quintanilla also allegedly received some of the fraudulently obtained money. Monreal, the central figure in the scheme to defraud Heileman, struck a deal with the government under which he has pleaded guilty to only two counts of the indictment. Monreal has agreed to testify against Quintanilla and Gutierrez.

 In addition to the scheme to defraud Heileman, the indictment charges Quintanilla with defrauding the City of Chicago of federal Job Training and Partnership Act ("JTPA") funds. Quintanilla allegedly achieved this scheme by causing Operation Search to submit false vouchers and other documentation to the Chicago office in charge of administering and distributing JTPA funds. The JTPA fraud forms the basis for Counts 27 through 40, in which Quintanilla alone is charged with various offenses relating to his acquisition of JTPA funds. In addition, in Count Two, Quintanilla is charged with violating section 1962(c) of RICO, by conducting the affairs of Operation Search through a pattern of racketeering activity. *fn2" The JTPA fraud is among the predicate acts alleged in Count Two.

 The government adds Quintanilla's alleged JTPA fraud to allegations in Count One regarding the Heileman fraud, and charges all three defendants with RICO conspiracy in violation of section 1962(d). *fn3" Count One alleges that the three co-defendants conspired to conduct Operation Search through a pattern of racketeering activity. Quintanilla and Gutierrez previously moved to dismiss Count One on the grounds that RICO is unconstitutionally vague and that the government failed to allege a single RICO conspiracy. In support of the motion to dismiss, Quintanilla and Gutierrez asserted that Quintanilla's alleged JTPA fraud was not part of the RICO conspiracy and that defendants would suffer unfair prejudice from the spillover of evidence relating to Quintanilla's JTPA fraud. In a memorandum opinion and order issued on February 7, 1991, this court denied Quintanilla's motion to dismiss Count One, rejecting the claim that RICO was unconstitutionally vague as applied to this particular case. The court also found that Count One was drafted so as to allege a single RICO conspiracy between Quintanilla, Monreal and Gutierrez to use Operation Search as the vehicle for accomplishing various predicate acts of fraud. See Mem. Op., Feb. 7, 1991 at 13. However, the court reserved consideration of defendants' argument regarding the potential prejudice of the government's use of evidence relating to Quintanilla's alleged JTPA fraud. Consideration of this argument was deferred until defendants' motion for severance was fully briefed. Id.

 DISCUSSION

 I. Quintanilla and Gutierrez' Motion for Severance

 Pursuant to Fed.R.Crim.P. 8(b) and 14, Quintanilla and Gutierrez move to sever Counts 27 through 40 of the indictment, which relate solely to Quintanilla's alleged scheme to defraud the City of Chicago of JTPA funds. Rules 8 and 14 of the Federal Rules of Criminal Procedure address similar concerns. Rule 8 sets the boundaries for joining defendants and offenses in a single indictment. The court assesses the propriety of joining offenses or defendants from the allegations in the indictment, not from evidence that the government plans to present at trial. United States v. Sophie, 900 F.2d 1064, 1084 (7th Cir.), cert. denied, 111 S. Ct. 124 (1990) ("joinder under Rule 8(b) is a matter of pleading, not trial proof"), citing Schaffer v. United States, 362 U.S. 511, 517 (1960); United States v. Velasquez, 772 F.2d 1348, 1354 (7th Cir. 1985), cert. denied, 475 U.S. 1021 (1986) ("test for misjoinder is what the indictment charges, not what the trial shows"). If joinder is proper under Rule 8, a trial court may still order severance pursuant to Rule 14 if joinder of offenses or of defendants will unfairly prejudice one or more defendants. Fed.R.Crim.P. 14. Thus, the court need not conduct a Rule 14 analysis unless, as a threshold matter, joinder is proper under Fed.R.Crim.P. 8. Velasquez, 772 F.2d at 1353.

 A. Joinder Under Rule 8

 Rule 8(b) allows the government to charge two or more defendants in the same indictment if they allegedly "participated in the same act or transaction or in the same series of acts or transactions constituting an offense or offenses." In the present case, Counts 27 through 40 charge only Quintanilla with offenses based on the JTPA fraud. Thus, joinder of the allegations against Quintanilla in Counts 27 through 40 with the remaining counts is proper only if Quintanilla's JTPA fraud and the Heileman fraud are part of "the same series of acts or transactions constituting an offense or offenses." Fed.R.Crim.P. 8(b). The Seventh Circuit interprets the "same series of acts or transactions" to mean acts that were committed pursuant to a common scheme or plan. Sophie, 900 F.2d at 1083, citing Velasquez, 772 F.2d at 1353. Although the Seventh Circuit has expressed a preference for joint trials of defendants in conspiracy cases, "it is not enough . . . that the crimes were of 'similar character.'" Sophie, 900 F.2d at 1083.

 Quintanilla and Gutierrez point out that Quintanilla alone is charged with conceiving and implementing the JTPA fraud. Thus, defendants argue that the indictment fails to allege a common plan among the three defendants to defraud the City of Chicago of JTPA funds. The government contends that joinder of the JTPA allegations is proper because Monreal, Gutierrez and Quintanilla are all charged with a single RICO conspiracy in Count One. The alleged goal of this RICO conspiracy was to use Operation Search to defraud Heileman and the City of Chicago. The government contends that as long as the indictment alleges a conspiracy that encompasses the JTPA fraud and the Heileman fraud, joinder of these offenses is proper.

 In one respect, the government is correct: joinder of offenses is proper where the indictment properly alleges a conspiracy. See United States v. Garner, 837 F.2d 1404, 1412 (7th Cir. 1987), cert. denied, 486 U.S. 1035 (1988) ("a conspiracy charge is a proper basis for joinder under Rule 8(b)"). However, the government must at least show that the allegations in the indictment support a conspiracy charge. The government relies on this court's February 7, 1991 memorandum opinion and order denying defendants' motion to dismiss Count One. The court found that there were sufficient allegations in Count One to support the charge that Monreal, Gutierrez and Quintanilla conspired to conduct Operation Search through a pattern of racketeering activity. See Mem. Op. at 13. Indeed, the allegations regarding only the Heileman fraud -- and not the JTPA fraud -- satisfy the pleading requirements for the RICO conspiracy charged in Count One. See United States v. Neapolitan, 791 F.2d 489, 498 (7th Cir.), cert. denied, 479 U.S. 940 (1986) ("a RICO conspiracy requires only an agreement to conduct or participate in the affairs of an enterprise through a pattern of racketeering activity"). The government attempts to bootstrap the court's ruling on the adequacy of the RICO conspiracy charge into a determination that joinder is proper under Rule 8(b). However, the two inquiries are not necessarily co-extensive; joinder is not automatically proper simply because the government artfully constructed a RICO conspiracy allegation that could encompass both the Heileman fraud and the JTPA fraud. Under Rule 8(b), Quintanilla's alleged use of Operation Search to achieve the JTPA fraud must have been part of an overall conspiracy among all three defendants to use Operation Search for fraudulent purposes. As defendants point out, the indictment fails to allege facts from which one could reasonably infer that all three defendants were a part of the JTPA fraudulent scheme.

 The government has suggested that an agreement to commit the JTPA fraud may be inferred from the allegation in Count Four which states that:

 It was further part of the scheme that on or before September 19, 1985, defendant Carlos Quintanilla paid kickbacks to defendant Joseph Monreal of the entire sum he obtained by fraud from Heileman as set forth in paragraph 13 of this Count, which money included federal Job Training Partnership Act funds which the City of Chicago had advanced to [Operation] Search for its job training program and as funds to be used to reimburse employers engaged in on-the-job training contracts with [Operation] Search.

 Count Four para. 14. *fn4" However, this allegation is not sufficient to indicate that the JTPA fraud was part of an overall RICO conspiracy between Gutierrez, Monreal and Quintanilla. Indeed, the fact that the government must rely on a single vague paragraph in a 100-page indictment charging forty counts demonstrates that the JTPA fraud was not part of "the same series of acts or transactions" as the Heileman fraud, which is clearly alleged as a conspiracy in the indictment. *fn5"

 Finally, the government contends that Count Two of the indictment requires this court to join the allegations regarding the JTPA fraud with the Heileman fraud allegations. Count Two charges Quintanilla with violating RICO ยง 1962(c) by conducting the affairs of Operation Search through a pattern of racketeering activity, including the Heileman fraud and the JTPA fraud. The government contends that the JTPA allegations may not be stricken because that would "impermissibly limit the government in its proof of Quintanilla's pattern of racketeering." Government's response at 8. However, the government cites no authority for this proposition. The government cannot escape the mandates of Rule 8(b) simply by including, in its forty-count indictment, a count in which one defendant allegedly engaged in a fraudulent scheme by himself. Furthermore, as discussed below, Rule 14 clearly permits severance of allegations that create unfair prejudice to a co-defendant, regardless of whether a severance limits the government's ability to prove one of its charges.

 B. Severance Under Rule 14

 Not only is joinder of the JTPA counts and allegations improper under Rule 8(b), but there is also merit in defendants' motion for severance under Rule 14. The decision to grant or deny a motion to sever under Rule 14 rests within the sound discretion of the trial court. United States v. Caliendo, 910 F.2d 429, 437 (7th Cir. 1990). Rule 14 provides, in relevant part:

 If it appears that a defendant or the government is prejudiced by a joinder of offenses or of defendants in an indictment or information or by such joinder for trial together, the court may order an election or separate trials of counts, grant a severance of defendants or provide whatever other relief justice requires.

 For efficiency reasons, the Seventh Circuit recognizes a presumption in favor of joint trials for defendants charged with conspiracy offenses. See Sophie, 900 F.2d at 1083 ("joint trials increase court efficiency, save witnesses the inconvenience of repeating their testimony at different trials, and avoid delays in bringing defendants to trial"). Nevertheless, "the presumption in favor of joint trials may not overshadow the need to ensure that each defendant receives a fair trial." Caliendo, 910 F.2d at 437-38, citing United States v. Peters, 791 F.2d 1270, 1302 (7th Cir.), cert. denied, 479 U.S. 847 (1986). The facts of each particular case may raise varying levels of concern over efficiency and potential prejudice. Thus, "the balancing of the cost of conducting separate trials and the possible prejudice inherent in a single trial is best conducted by the trial court." Caliendo at 437, quoting United States v. Moya-Gomez, 860 F.2d 706, 754 (7th Cir. 1988), cert. denied, 109 S. Ct. 3221 (1989).

 Even had the government properly alleged a conspiratorial link between the JTPA fraud and the Heileman fraud, the potential prejudice to Gutierrez warrants severance of the allegations regarding the JTPA fraud. The indictment fails to link Gutierrez with Quintanilla's conduct in defrauding the City of Chicago of JTPA funds. Furthermore, the only possible connection between Quintanilla's JTPA fraud and the Heileman fraud consists of paragraph 14 of Count Four, supra. That paragraph maintains that Quintanilla gave Monreal, not Gutierrez, money from both the Heileman and the JTPA frauds. As mentioned above, Monreal entered into a plea agreement with the government and will not stand trial. Thus, it would be unduly prejudicial for the government to introduce evidence of Quintanilla's JTPA fraud during the joint trial of Gutierrez and Quintanilla, when no factual allegation in the indictment even suggests that Gutierrez played any part in defrauding the City of Chicago of JTPA funds. Accordingly, the court exercises its discretion under Rule 14 and grants the motion for severance of Counts 27 through 40. In addition, all allegations regarding the JTPA fraud shall be stricken from the indictment.

 CONCLUSION

 The motion of defendants Quintanilla and Gutierrez to sever Counts 27 through 40 is granted. In addition, defendants' motion to strike all allegations regarding the JTPA fraud in the superseding indictment is granted.


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