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United States v. Luce

September 29, 2006


The opinion of the court was delivered by: Judge Blanche M. Manning


This case involves eleven defendants charged with various crimes for causing publicly-held companies to issue stock to persons in payment for work never performed. Two of the defendants, David Calkins and Robert Luce, have filed numerous pre-trial motions, which the court discusses after a brief summary of the allegations in the indictment.


The indictment charges defendant Frank Custable with scheming with the officers of four companies to distribute millions of shares of stock in those companies to individuals under Custable's control. The distributions were allegedly in payment for "consulting services" or other work when, in fact, no such work had been performed. In exchange, Custable allegedly paid kickbacks in the form of sham loans to the companies. Although Custable is charged with scheming with each of the four companies, the indictment does not charge the four companies or their officers with scheming with each other, and there are no allegations of a conspiracy.

Defendant Calkins was the president of one of those four companies, Pacel Corporation. Of the indictment's 23 charges, just three are directed at Calkins. Count V charges Calkins with wire fraud for a July 16, 2001, fax about where he should send 7.5 million shares of Pacel stock. Count VI charges him with wire fraud for an August 1, 2001, fax about issuing 17.5 million shares of Pacel stock. Finally, Count VII charges Calkins with wire fraud for a May 23, 2002, fax about issuing 3.2 million shares of Pacel stock.

Defendant Luce was an attorney who represented some of Custable's businesses. In addition to charges of wire and mail fraud, he also faces charges of filing false documents with the Securities and Exchange Commission, as well as obstruction of justice for allegedly interfering with an SEC civil proceeding.

Calkins has filed three pretrial motions. In the first, Calkins asks that his trial be severed from the other defendants' because evidence of the wrongdoing by the officers of the other companies with whom Custable schemed would unfairly prejudice him. Second, Calkins asks for a Bill of Particulars because, he contends, most of the indictment alleges conduct by the defendants generally, leaving him unable to discern exactly what charges he must defend. Finally, Calkins asks the court to compel the government to disclose all communications between the SEC and the U.S. Attorney's office or any other law enforcement agency.

Luce has filed eight pretrial motions, including (1) a motion for notice of the government's intent to use evidence of other crimes or wrongs; (2) a motion for the disclosure of favorable evidence as required by Brady v. Maryland, (3) a motion for the preservation of notes and transcripts of investigators' interviews of witnesses; (4) a motion to produce all recordings made of or about Luce; (5) a motion to inspect the government's evidence; (6) a motion for the early return of trial subpoenas; (7) a motion to permit attorneys to questions prospective jurors during voir dire; and (8) a motion for leave to file additional pretrial motions even though the deadline has passed.

The court will address each motion in turn.


Calkins' Pre-Trial Motions

Motion for Severance [85-1]

Federal Rule of Criminal Procedure 8(b) permits joinder of 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." Fed. R. Crim. P. 8(b) (emphasis added); United States v. Souffrant, 338 F.3d 809, 827-28 (7th Cir. 2003). In fact, joint trials are favored because they are efficient, limit inconvenience to witnesses, and avoid delays. See Souffrant, 338 F.3d at 828; United States v. Stillo, 57 F.3d 553, 556 (7th Cir. 1995).

Nevertheless, in some circumstances a consolidated trial may prejudice the defendant or the government. In that case, Rule 14(a) permits the court to order separate trials if "the joinder of offenses or defendants . . . appears to prejudice a defendant or the government." Fed. R. Crim. P. 14(a); Souffrant, 338 F.3d at 828. However, the mere existence of prejudice does not demand severance. To the contrary, severance should be granted only in the face of a "serious risk that a joint trial would compromise a specific trial right of one of the defendants, or prevent the jury from making a reliable judgment about guilt or innocence." United States v. Olson, 450 F.3d 655, 677 (7th Cir. 2006). Courts enjoy wide discretion in determining whether or not the risk of prejudice is serious enough to warrant severance. Souffrant, 338 F.3d at 828.

Calkins argues that he is entitled to severance because evidence of Custable's schemes with the officers of the other companies will prejudice him. Specifically, he contends that the cumulative effect of evidence that the other officers schemed with Custable will cause a spillover effect that will lead jurors to conclude that he must have also schemed with Custable. According to Calkins, the spillover effect would be unfair because the indictment does not allege a conspiracy or any other connection between him and the officers of the other companies. In fact, Calkins asserts, he never knew the other officers or that Custable was involved with them.

In support, Calkins relies heavily upon an order entered last year by Judge Grady in United States v. Glennon, No. 05 CR 408 (N.D. Ill. Dec. 19, 2005). In Glennon, Judge Grady granted a defendant's motion for severance even though in other cases he had "almost always denied severance motions." Id. at 1. In some respects, the facts of Glennon are remarkably similar to the facts presented in this case. In Glennon, defendant Levine was charged with engaging in fraudulent schemes involving five separate construction projects. The remaining defendants, including Glennon, were charged with scheming with Levine separately, but there was no allegation that the other defendants had schemed with each other and no allegation of a conspiracy.

Despite the similarities, one difference distinguishes Glennon: Glennon was charged with aiding and abetting. In order to convict, the government needed to prove two propositions: first, that Levine committed fraud; and second, that Glennon aided and abetted that fraud. Therefore, Glennon's guilt was conditioned upon Levine's. That is not the situation in this case. To convict Calkins, the government must prove merely that he engaged in wire fraud; his guilt is not conditioned upon Custable's.

The distinction is critical. Judge Grady found that the risk of unfair prejudice for Glennon was high because, if the government succeeded in showing that Levine engaged in fraud on any of the other projects, the jury would be likely to also find that Levine engaged in fraud on Glennon's project:

If the jury finds Levine guilty of fraudulent transactions in regard to any of the other four projects, let alone all four of them, it is highly likely that they will also find Levine guilty on [the counts directed at Glennon]. It would be unrealistic to expect that there would be no spillover effect . . . If Glennon were tried jointly with the other defendants on the indictment as it stands, he would by virtue of that joiner be at a substantial disadvantage in regard to the first of ...

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