[EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.] ORIN R. KITZES, J.
The following papers numbered 1 to 15 read on this motion by plaintiff 68 Burns New Holding Inc. for an order granting summary judgment against the defendant in the sum of $29,803.54, plus costs and statutory interest from the date of the filing of the summons and complaint. Defendants cross-move for an order granting summary judgment dismissing the complaint.
Papers Numbered Notice of Motion-Affirmation-Affidavit-Exhibits (1-10, A-M)........ 1-6 Notice of Cross Motion-Affidavits-Affirmation-Exhibits(A-L)........ 7-12 Opposing Affidavit-Exhibits........................................ 13-15 Memorandum of Law.................................................. Reply Memorandum of Law............................................
Upon the foregoing papers the motion and cross motion are determined as follows:
Burns Street Owners Corp., defendant herein is a residential cooperative, consisting of five separate buildings located at 68-12, 68-20, 68-30, 68-36 and 68-44 Burns Street, Forest Hills. Each building has approximately 24 apartments, numbered 1A-4F. Century Management Services, Inc., defendant herein, is the cooperative's managing agent.
Plaintiff 68 Burns New Holding Inc., is an investor and holder of unsold shares to several apartments. At the time this action was commenced in October 2000, plaintiff owned shares to 16 apartments located within various buildings in the cooperative. Plaintiff has since sold six or more apartments.
The Senior Citizen Rent Increase Exemption (SCRIE) provides assistance to eligible seniors who reside in rent controlled or rent stabilized housing. Seniors who apply for and are approved for SCRIE benefits are exempt from paying rent increases, and their landlords receive a equivalent credit (abatement) on their property taxes. Plaintiff asserts that since 1994, the defendant cooperative has failed to fully credit it with SCRIE tax credits for apartment F1 located at 68-20 Burns Street, and occupied by Johanna Reichel, and apartment Al located at 68-12 Burns Street and occupied by Nat Ray, totaling $29,803.54.
Plaintiff commenced this action to recover damages for the defendants' failure to properly apply SCRIE credits on October 12, 2000. The court, in an order dated November 27, 2000 denied the plaintiff's motion for a preliminary injunction and dismissed the complaint for the failure to state a cause of action. The Appellate Division, in an order dated, May 31, 2005 affirmed the denial of the injunction, and the dismissal of the fist and fourth causes of action and reinstated the second and third causes of action ( 68 Burns New Holding, Inc. v Burns Street Owners Corp., 18 AD3d 857). Plaintiff thereafter moved to amend the complaint and restore the action to the general calendar and the court, in an order dated May 30, 2007, granted the motion to restore and granted the motion to amend the complaint to the extent that the first cause of action for fraud, the fourth cause of action for tortious interference with contract and the ninth cause of action for a shareholders' derivative action were stricken.
Plaintiff thereafter served the supplemental complaint which noted the stricken causes of action and defendants served an amended answer. Plaintiff's second cause of action for breach of contract alleges that the defendants failed to properly and timely credit plaintiff for SCRIE tax credits, causing plaintiff to pay a maintenance in a higher amount than that actually owed; the third cause of action for breach of contract alleges that defendants have refused to permit plaintiff to sell its shares to the apartments absent the payment of legal and late fees and that defendants are in breach of the bylaws. The fifth cause of action for conversion alleges that defendants failed to provide plaintiff with the SCRIE credits or their monetary equivalent. The sixth cause of action alleges that defendants breached their fiduciary duty to plaintiff by failing to pass on the SCRIE tax credits. The seventh cause of action seeks an accounting. The eighth cause of action for negligence alleges a breach of duty based upon the failure to apply for SCRIE credits and crediting them to the plaintiff.
Plaintiff alleges that the defendants failed to pay over to it SCRIE credits the cooperative received for apartments F1 at 68-20 Burns Street, occupied by Johanna Reichel, and apartment A1 at 68-12 Burns Street, occupied by Nat Ray, and now seeks an order granting summary judgment in the sum of $29,803.54, together with statutory interest from October 12, 2000. In support of the motion, plaintiff has submitted an affidavit from Gideon Raviv, who states that he is the "principal owner" of the plaintiff corporation. According to Mr. Raviv's calculations, defendants received SCRIE tax credits with respect to Johanna Reichel (apartment F1) of $5,081.76 for the period of April 1, 1994 through March 31, 1996 and SCRIE credits of $10,589.10 for the period of April 1, 1996 through September 30, 1999, for a subtotal of $15,670.86; and a 2001 adjustment from New York City for 2001 of $6,737.94. These SCRIE credits, together with said adjustment, totals $22,408.80.
With respect to the SCRIE credits for Nat Ray (apartment A1), plaintiff asserts that for each of the period from January 1, 1994 through June 30, 1994, July 1, 1994 through December 31, 1994, January 1, 1994 through June 30, 1995, and July 1, 1995 through December 31, 1995, defendants received SCRIE credits of $1,245.90 ($1,245.90 x 4); for the periods of January 1, 1996 through March 31, 1996, April 1, 1996 through June 30, 1996, July 1, 1996 through September 3, 1996; October 1, 1996 through December 31, 1996 defendants received SCRIE credits of $711.93 ($711.93 x 4); for the periods of January 1, 1997 through June 30, 1997 and for April 30, 1997 [sic] defendants received SCRIE credits of $807.60 ($807.60 x 2); for the period of July 1, 1997 through December 31, 1997 defendants received SCRIE credits of $1,615.20; for the period of January 1, 1998 through December 31, 1999 defendants received SCRIE credits of $4,983.60; for the period of January 1, 2000 through December 31, 2001 defendants received SCRIE credits of $4,983.60; for the period of January 1, 2001 through December 31, 2001 defendants received SCRIE credits of $4,983.60; and for the period of January 1, 2004 through December 31, 2009 defendants received a SCRIE credit of $309.38 a month, totaling $22, 275.36. Plaintiffs also asserts that the defendants received an adjustment in 2001 from New York City of $8,215.44. Plaintiff asserts that these SCRIE credits, together with said adjustment for this apartment totals $56,503.32.
According to plaintiff's calculations, in 1999 it received SCRIE credits totaling $15,838.08 for both apartments for the period of January 1, 1996 through December 31, 1998; and that it received SCRIE credits totaling $49,108.58 for the period of January 1, 2006 thought December 31, 2007 for the apartment occupied by Mr. Ray, which were received on various dates between November 1, 2000 and 2007. Plaintiff asserts that it was due a total of $78,912.12 in SCRIE credits, that it only received credits of $49,108.58, and therefore is due the sum of $29,803.54.
Defendants' cross-move in opposition and seek an order granting summary judgment dismissing the complaint. Defendants, in support of their cross motion have submitted an affidavit from Thomas Spatarella, the controller of Excel Bradshaw Management Group LLC (Excel). Mr. Spatarella states that Excel was retained by the cooperative on January 1, 2009 to manage the buildings located at 68-12, 68-20, 68-30, 68-36, and 68-44 Burns Street, Forest Hills, New York and replaced Century Management Services, Inc., as the managing agent. Mr. Spatarella states that his duties include reviewing the cooperative's accounting, tax and financial records, and that he is responsible for auditing the cooperative's accounts and managing its general financial affairs. Mr. Spatarella states that plaintiff has been credited with all SCRIE credits it is entitled to receive for the disputed period, totaling $64,580.93.
Mr. Spaterella states that the tenant residing in apartment F1 located at 68-20 Burns Street ceased to occupy the apartment after October 1999 and that no SCRIE credits were allocated for this apartment after that date. He states that plaintiff has omitted from his calculations SCRIE credits it received in 2000, totaling $15,472.35, which were applied to his maintenance account, and were also included in a stipulation of settlement dated July 20, 2000.
Mr. Spaterella states that for the period of 1996 through 1998, plaintiff admittedly received SCRIE credits of $15,838.08; that for the period of 2000-2001, plaintiff received the sum of $12,609.87 from the cooperative for all previously outstanding SCRIE credits attributable for the years between 1994 and 2000, including a payment of $622.95 in 2000; that plaintiff admitted to having received the sum of $622.95; that plaintiff received and cashed a check in the sum of $4,983.60 for SCRIE credits which accrued between 2002 and 2003; that plaintiff received and cashed a check for SCRIE credits of $3, 916.00 in 2004; that plaintiff received and cashed checks for SCRIE credits that accrued in 2005 totaling $3,712.56; and that plaintiff was paid the sum of $7,425.12 for SCRIE credits that accrued in 2006 and 2007, which were applied to his maintenance account until December 2007.
Defendants further assert that plaintiff's calculations are in error as it has counted twice, two "tax adjustments" received by the cooperative on its 2001-2002 tax bill, in the amount of $6,737.94 and $8,215.44. Defendants assert that these adjustments are clerical transfers between the Department of Aging and the Department of Finance and do not represent SCRIE credits received over and above the amounts the Department of Aging previously calculated and credited to the cooperative for the same time period. Defendants thus assert that plaintiff, in calculating the SCRIE credits, may not count these amounts twice.
In addition, defendants assert that the claimed adjustment of $6,737.94 for apartment 1F is problematic, as plaintiff stopped renting apartment 1F to a qualifying elderly tenant in October 1999, and plaintiff's documentary evidence establishes that the Department of Aging stopped crediting the cooperative for apartment 1F in October 1999. Therefore, defendants assert that plaintiff is not entitled to receive any SCRIE credits for this apartment after that date. Defendants further assert that the SCRIE credit set forth in the tax bill relied upon by plaintiff does not designate a particular apartment and in fact was for another cooperative apartment, not one owned by the plaintiff. Defendants thus assert that plaintiff's calculated total of $78,912.12 must be reduced by $14,953.38 (the total of the two adjustments), to $63,958.74. Defendants assert that as plaintiff admittedly received SCRIE credits of $49,108.58, as well as SCRIE credits of $15,472.35 in 2000, plaintiff received SCRIE credits totaling $64,580.93, which is in excess of the SCRIE credits it was to entitled to during the subject period. Defendants thus assert that there are no sums due plaintiff.
Mr. Raviv, in opposition to the cross motion and in support of plaintiff's motion, takes issue with Mr. Spatarella's affidavit on the grounds that he is not associated with the defendants and lacks personal knowledge of the facts. Mr. Raviv further asserts that with respect to the stipulation entered into in the Queens County Civil Court in 2000, which indicates that plaintiff received SCRIE credits of $15,472.35, defendants' accounting records do not show that they credited plaintiff with this amount. Mr. Raviv also asserts that Mr. Spatarella lacks personal knowledge as to whether clerical transfers were made between the Department of Finance and the Department of Aging, and that these transfers were made as a result of a personal visit Raviv made to the Department of Aging on August 16, 2000. He states that he submitted ten "Owner's Affidavits for Verification of Unused Rent Controlled Tax Abatement Certificate"; that the Department of Aging approved the requests; and that these approvals were transferred to the Department of Finance for payment. Mr. Raviv states that these SCRIE credits were paid over to the defendants and that defendants have not transmitted these sums to the plaintiff. He asserts that these two "clerical adjustments" represent sums that are due the plaintiff, totaling $14,953.38, and that the total amount due plaintiff is $29,803.54, together with 9% interest from the date this action was commenced.
Contrary to plaintiff's assertions, Mr. Spatarella's affidavit is properly before the court, as he is employed by the cooperative's current managing agent and his job duties encompass the review of the cooperative's financial records, including tax records.
The documentary evidence submitted herein establishes that the cooperative, Burns Street Owners Corp., as petitioner-landlord and 68 Burns New Holdings Inc., as respondent-tenant entered into a stipulation in actions commenced by the cooperative in the Civil Court, Housing Part (L T Index No. 59094-59108/2000) whereby 68 Burns New Holdings Inc., acknowledged that:
"1. Respondents owe $18,773.20 as all base maintenance due through July 31, 2000 and have paid the same in full by Attorney IOLA check #1623." The stipulation further states that:
2. The above figure includes SCRIE credits as follows:
68-20 Apt. 1F 1/94-3/94 3 motion X$190.95 $ 572.85 4/94-12/95 21 motion X $211.74 $ 4,446.54 1/99-7/99 7 motion X $247.38 $ 1,731.66 68-12 Apt. 1A 1/94-12/94 12 motion X $207.65 $2,491.80 1/95-12/95 12 motion X $207.65 $2,491.80 1/99-6/00 18 motion X $207.65
$ 3,737.70 $15,472.35
3. The parties agree that each side preserves its right to any additional scrie credits and/or adjustments which may be due . . ."
Defendants have submitted a copy of the face of IOLA check 1623, dated July 20, 2000, in the sum of $18,773.20, drawn on the IOLA account of Meryl Wenig, an attorney who also executed the stipulation on behalf of 68 Burns New Holding Inc. Plaintiff does not assert that this check was not negotiated by the cooperative. Plaintiff's assertion that the defendants "accounting records" do not reflect that it credited plaintiff the SCRIE credits set forth in the stipulation of settlement, is rejected. Plaintiff is bound by the terms of said stipulation of settlement. Having turned over to the cooperative SCRIE credits totaling $15,472.35 for the two subject apartments for the periods set forth in the stipulation, plaintiff may not recover these same SCRIE credits from the cooperative.
Plaintiff has also failed to demonstrate that the Department of Aging transferred additional SCRIE credits for the period in question to the Department of Finance which were allocated to the defendant cooperative and not paid over or credited to the plaintiff. The ten requests filed by plaintiff with the Department of Aging state on their face that they are used for the purpose of processing a request for a duplicate Rent Control Tax Abatement Certificate. These requests, however, do not establish that any further funds were credited to the defendants as a result of Mr. Raviv having filled out these forms.
The documentary evidence submitted herein establishes that the Department of Finance issued annual real estate bills from 2001-2002, for 68-12 Burns Street and 68-20 Burns Street. The bill for 68-12 Burns Street states that there is a SCRIE adjustment of $8,215.44 and the bill for 68-20 Burns Street states that there is a SCRIE adjustment for $6,737.94. These bills, however, do not specify the apartment numbers or tenants in each building which received the SCRIE adjustment.
Plaintiff's claim that it is entitled to SCRIE credits of $6,737.94, based upon the 2001-2002 tax bill, is rejected. It is undisputed that apartment 1F located at 68-20 Burns Street was occupied by Johanna Reichel, and that no SCRIE credits were allocated to this apartment after October 1999. The documentary evidence submitted by plaintiff includes a statement from the Department of Aging issued in 2000, which lists Ms. Reichel's status as "deceased." There is no evidence that Department of Finance permitted SCRIE credits for apartment 1F after October 1999. There is also no evidence that plaintiff owned any other apartment located at 68-20 Burns Street which was granted SCRIE credits after October 1999.
With respect to the 2001-2002 tax bill for 68-12 Burns Street, plaintiff has failed to establish that any portion of the $8,215.44 SCRIE adjustment pertains to apartment A1 occupied by Nat Ray. None of the documents issued by the Department of the Aging submitted by plaintiff pertain to the tax assessment period of 2001-2002. In addition, at least one other apartment at this address was granted SCRIE tax abatement credits, and plaintiff does not assert that it owned that apartment as well as the unit occupied by Mr. Ray. The documentary evidence submitted herein thus is insufficient to establish that plaintiff is entitled to a SCRIE adjustment in the sum of $8,215.44 with respect to apartment 1A. In addition, plaintiff has failed to establish that it is entitled to any portion of the SCRIE funds set forth in the 2001-2002 tax bill. Plaintiff has not submitted an affidavit from a person with personal knowledge regarding the alleged transfer of said funds from the Department of Finance to the defendants, and Mr. Raviv's self-serving affidavit is insufficient to establish that such a transfer occurred.
In view of the foregoing, plaintiff's motion for summary judgment in its favor is denied. Since plaintiff cannot establish that the defendants owe it any SCRIE credits or funds for to the relevant periods, that branch of defendants' cross motion which seeks to dismiss the second cause of action for breach of contract, is granted.
That branch of defendants' motion which seeks to dismiss the third cause of action for breach of contract, is granted. Plaintiff in its third cause of action alleges that the defendants prevented it from selling shares of stock to three apartments, by conditioning such sales upon the payment of maintenance arrears, including late fees and attorney fees, in violation of the bylaws. This claim is now moot, as it is undisputed that plaintiff is no longer the owner of the shares of stock and proprietary lease to apartment 2C located at 68-36 Burns Street, apartment 1B located at 68-30 Burns Street, and apartment 1F located at 68-20 Burns Street.
That branch of defendants' cross motion which seeks to dismiss the fifth, sixth and eight causes of action for conversion, breach of fiduciary duty and negligence, is granted. These causes of action are duplicative of the breach of contract claims, as they based on the same facts alleged in the breach of contract claims, and are not based upon legal duties independent of the contract allegedly violated ( see generally New York University v Continental Ins. Co., 87 NY2d 308; Brown v Brown, 12 AD3d 176).
That branch of defendants' cross motion which seeks to dismiss the seventh cause of action for an accounting is granted. Plaintiff, having moved for summary judgment, no longer seeks an accounting, and does not contest defendants' assertion that they have provided all documents previously sought.
Finally, that branch of defendants' motion which seeks to dismiss all claims against Century Management Services Inc., is granted. "It has long been an `established rule of law that the agent is not liable to third persons for non-feasance but only for affirmative acts of negligence or other wrong' ( Greco v Levy, 257 App Div 209, 211, 12NYS2d 470 [1939], affd 282 NY 575, 24 NE2d 989). The reason is clear. `Unless the agent has assumed authority and responsibility, as if he were acting on his own account, then the duty which the agent fails to perform is a duty owing only to his principal and not to the third party to whom he has assumed no obligation ( Jones v Archibald, 45 AD2d 532, 535, 360 NYS2d 119)." ( Pelton v 77 Park Ave. Condominium, 38 AD3d 1, 11). Here, it is undisputed that at all times Century Management Services acted as a disclosed principal for its agent, the cooperative. Plaintiff has not pleaded or shown circumstances that would demonstrate either that the then managing agent owed plaintiff a duty or that it was affirmatively negligent. Plaintiff, therefore, may not maintain any claims against Century Management Services.
Accordingly, plaintiff's motion for summary judgment is denied, and defendants' cross motion to dismiss the complaint in its entirety is granted.
more common view is that Rule 8(b) is a pleading rule and the propriety of joinder is determined by the allegations in the indictment." Charles A. Wright and Andrew D. Leopold, 1A Fed. Prac. Proc. Crim. § 144 (4th ed.). In any event, until the Second Circuit has occasion to formally address this issue, the Court is required to heed that court's explicit caution.
See Rittweger, 524 F.3d at 178 n. 3. For that reason, neither
United States v. Brown,
676 F. Supp. 2d 220, 223 (S.D.N.Y. 2009), which does not cite
Rittweger in considering pre-trial representations, nor
United States v. De Yian, No.
94 Cr. 719,
1995 WL 368445, at *9-10 (S.D.N.Y. June 21, 1995) or
United States v. Victor Treicher Co., L.P., 726 F. Supp. 1424, 1430 (S.D.N.Y. 1989), which did the same more than a decade before
Rittweger, is persuasive.
In its brief, the government presents this case as a Venn diagram in which "the key figure at the center of each scheme also participates in the other." (Gov't Opp'n at 9-10.) However, it is difficult to recognize the government's portrait of the Indictment because the features the government describes appear nowhere on the face of the Indictment. The Indictment makes no mention of a "Galleon Scheme" or a "New Castle Scheme" but instead alleges seven insider trading schemes identified by their participants, e.g., "The Rajaratnam-Far Insider Trading Scheme," and "The Rajaratnam-Chiesi Insider Trading Scheme." Why the government may have charged two alleged insider trading rings as seven different conspiracies is something of a mystery but is immaterial for purposes of the pending motions. The Indictment must be measured under Rule 8(b) not by what the government could have alleged or what it hopes to prove but by the language the government has actually used in charging the defendants with their alleged crimes. "[W]here the government seeks joinder of counts on the basis of `same or similar character,' it crafts a barebones indictment at its own risk." Jawara, 474 F.3d at 578.
1. Count One
Count One alleges that, from 2003 to March 2009, Rajaratnam conspired with Ali Far to trade on inside information regarding Atheros, Marvell, and nearly two dozen "other companies" it has since identified. ( See Indictment at ¶ 4.) Since the face of the Indictment does not name these companies — or the sources of information regarding them — the Court does not consider any of those allegations.
Count One has almost nothing in common with Count Five, which alleges that from August 2008 to April 2009, Chiesi conspired with CC-1, a former IBM employee, to trade on inside information regarding IBM, AMD, Sun, and "other companies." (Indictment at ¶¶ 31-32.) The two counts do not identify any of the same people: Count One identifies Rajaratnam and Far; Count Five identifies Chiesi and CC-1. Nor do the counts refer to inside information regarding any of the same companies: Count One alleges trading in Atheros, Marvell, and "other companies"; Count Five alleges trading in IBM, AMD, Sun, and "other companies." No other count in the Indictment describes any other similarity between Count One and Count Five. Rather, the only commonality between the two counts is that they charge the same offense, an insider trading conspiracy. But Rule 8(b) "does not permit joinder of defendants solely on the ground that the offenses charged are of the same or similar character." Turoff, 853 F.2d at 1042 (quotation marks omitted). Counts One and Five are therefore improperly joined.
Count One has no more in common with Count Seven than with Count Five. Count Seven alleges that, from July 2008 to April 2009, Chiesi conspired with Mark Kurland, also of New Castle, to trade on inside information regarding IBM, AMD, Akamai, Sun, and "other companies." ( Id. at ¶¶ 44-45.) Again, the counts do not identify any of the same people: Count One identifies Rajaratnam and Far; Count Seven identifies Chiesi and Kurland. Nor do the counts refer to inside information regarding any of the same companies: Count One alleges trading in Atheros, Marvell, and "other companies"; Count Seven alleges trading in IBM, AMD, Sun, and "other companies." Instead, the two counts merely describe two groups of different people conspiring to commit the same offense in different ways. Counts One and Seven are therefore improperly joined. See Turoff, 853 F.2d at 1042.
Count One has more in common with Count Six than with Count Five or Count Seven. Count Six alleges that, from July to October 2008, Rajaratnam and Chiesi conspired with each other and others to trade on inside information regarding AMD and Akamai. Count Six essentially alleges a quid pro quo: Rajaratnam gave Chiesi inside information regarding AMD from Anil Kumar; Chiesi gave Rajaratnam inside information regarding AMD and Akamai from CC-1 and the Akamai Source; and each traded on the information he or she received from the other. ( See Indictment at ¶ 38.) While Counts One and Six do not allege trading on information regarding any of the same companies, they do allege that Rajaratnam was involved in both conspiracies. Hence Counts One and Six share a common participant.
However, "the mere existence of similarities between some of the actors or some of the crimes committed will not suffice" under Rule 8(b). United States v. Carrozza, 728 F. Supp. 266, 270 (S.D.N.Y. 1990). Indeed, numerous courts in this district have held that charging one defendant in two conspiracy counts does not render the counts properly joined where only one of the counts charges a second defendant. See United States v. Kouzmine, 921 F. Supp. 1131, 1133-34 (S.D.N.Y. 1996) (severing immigration fraud conspiracy count charging two defendants and others from immigration conspiracy count charging only the others); United States v. Lech, 161 F.R.D. 255 (S.D.N.Y. 1995) (Sotomayor, J.) (severing bribery conspiracy count charging three defendants from two other bribery conspiracy counts charging only two of the three defendants); United States v. Menashe, 741 F. Supp. 1135 (S.D.N.Y. 1990) (severing conspiracy count charging three defendants with scheme to sell cargo planes to Iran from conspiracy count charging only one of the three defendants with scheme to sell anti-aircraft missiles to another country); United States v. Giraldo, 859 F. Supp. 52, 54-55 (E.D.N.Y. 1994) (severing drug conspiracy count charging three defendants and Giraldo from drug conspiracy count charging Giraldo alone); Carrozza, 728 F. Supp. at 270 (severing extortion conspiracy count charging three defendants and Carrozza from extortion conspiracy count charging Carrozza alone).
Counts One and Six have no more in common with each other than the pairs of conspiracy counts found improperly joined in the above-cited cases. Rajaratnam allegedly participated in both the scheme charged in Count Six and the scheme charged in Count One, but that makes little difference considering the Indictment from Chiesi's perspective. Count One does not even mention Chiesi. Thus, on the face of the Indictment, Chiesi "had no involvement in the other scheme[] charged." Lech, 161 F.R.D. at 257. In fact, nothing else in the Indictment alleges that Chiesi even knew anything about Count One; "at most, [s]he had cursory knowledge of the other criminal activities. . . ." Id. As noted, "[k]nowledge of the other conspiracy [may not be] required, but it is an indicator of whether or not there is a common scheme or purpose." Ohle, 678 F. Supp. 2d at 225 (severing indictment that charged defendant in connection with one scheme but did not allege that defendant had any knowledge of other charged schemes).
Thus even if Rajaratnam planned both schemes, his "plan cannot be called `common', since he [wa]s the only one alleged to be aware of it." Menashe, 741 F. Supp. at 1138; see also Kouzmine, 921 F. Supp. at 1133 (severing indictment where "there was no evidence that the defendants joined in the indictments were aware of or joined in all of the schemes alleged"). Absent "some substantial identity of facts or participants" or "a common plan or scheme", Counts One and Six are improperly joined.
For the same reason that Count One is improperly joined with Counts Five, Six, and Seven, Count One is improperly joined with Counts Ten, Thirteen, and Fifteen (the substantive counts of insider trading regarding Akamai against both defendants) and improperly joined with Counts Eleven, Twelve, Fourteen, and Sixteen (the substantive counts of insider trading regarding Akamai against Chiesi alone).
The government argues that joinder cannot turn on mutual awareness because the defendants in Rittweger were not aware of each other's conspiracies. ( See Gov't Opp'n at 10-11, 14-15.) Perhaps so; yet the government itself acknowledges the relevance of knowledge in its unsuccessful effort to read the Indictment as actually charging two over-arching schemes in which both defendants participated and of which they were "necessarily" aware. ( See id. at 6.) The government again recognizes the importance of this factor in arguing that the defendants in Feryer were properly joined because they "were aware of each other's participation in fraud." (Gov't Opp'n at 11 (citing Feyrer, 333 F.3d at 114).) Yet the government can point to no language in the Indictment that suggests that Counts One and Six have anything more in common than that they both charge Rajaratnam. That standard would expose a defendant to "the risks inherent in joinder of [multiple] alleged conspiracies simply because he had the misfortune of being charged with another defendant who was subject also to other accusations." See Kouzmine, 921 F. Supp. at 1133. Not surprisingly, the government does not advance that interpretation of the Rule. Rittweger is not to the contrary. In Rittweger, the indictment alleged two conspiracies: (1) an alleged Ponzi scheme to defraud investors in the "CBL Insured Credit Facility" and the "CBL Insured Securities Strategy" involving defendants Rittweger, Blech, Brandon and other co-defendants; and (2) a scheme involving defendants Rittweger, Blech, and Wexler — but not defendant Brandon — to defraud investors in the CBL Insured Credit Facility who were solicited by other co-defendants, none of whom were named in the first scheme. See Rittweger, 524 F.3d at 175-76. Hence the "indictment allege[d] that both [schemes] were efforts to induce CBL customers to invest cash, securities and other assets" in the same Ponzi scheme, resulting in a substantial overlap of participants and facts relating to that scheme. Id. at 177. Accordingly, the Second Circuit held that Brandon and Wexler were properly joined even though neither was alleged to have been involved in both schemes. See id. at 178. The same cannot be said for the schemes alleged in Counts One and Six that involve different co-participants trading on inside information on different stocks. Hence the government's argument that "members of two or more conspiracies may be joined as defendants even where the members have not been charged as participating in one overarching [conspiracy]" is wide of the mark. (Gov't Opp'n at 12 (quoting Rittweger, 524 F.3d at 178)). While the indictment need not allege that Rajaratnam and Chiesi participated in "one overarching insider trading conspiracy", it must allege that the separate conspiracies evince a common plan with a substantial overlap of participants and facts. The indictment in Rittweger did so; the Indictment here does not.
But see United States v. Guttenberg, 07 Cr. 141, 2007 WL 4115810 (S.D.N.Y. Nov. 14, 2007), in which the court held that charges against a tippee for allegedly conspiring with an investment banker to trade on the basis of inside information were properly joined with charges against the investment banker for conspiring with a different tippee. Judge Batts concluded that "[b]ecause [the tippee and the banker] [we]re alleged to have conspired together to violate federal securities law, their joinder as Defendants [wa]s proper." Id. at *7. That reasoning is unpersuasive for the reasons discussed above. Rather, the Court will follow the numerous other decisions in this Circuit that have analyzed the relationship between the offenses in which a defendant is charged with a co-defendant and the offenses with which only the co-defendant is charged. See, e.g., United States v. Reale, No. 96 Cr. 1068, 1997 WL 580778, at * 11 (S.D.N.Y. Sept. 17, 1997) (finding joinder improper where co-conspirators "committed separate acts that did not share a common aim with the other charges alleged in the Indictment") (emphasis added).
That also renders Feyrer inapposite. In Feyrer, the indictment alleged two conspiracies: (1) a scheme by defendant Yost, the president of Banyan Corporation, to inflate the price of Banyan stock by paying bribes to brokers at the Symons Financial Group to promote the stock; and (2) a scheme by defendant Goldenberg, the principal of First Colonial Ventures, Ltd., to inflate the price of First Colonial stock by paying bribes to brokers at Symons to promote the stock. See 333 F.3d at 112. Both defendants attended a meeting in Las Vegas with Symons executives to discuss their plans to bribe brokers and both wired money to the same Symons executive middleman in furtherance of their schemes. See id. at 113. Accordingly, the Second Circuit held that there was "no doubt that the charges against Yost and Goldenberg were united by overlapping facts and participants and a common plan." Id. at 114. But no such coordination is present between Count One and Counts Five and Seven, or even Count Six. These counts allege nothing akin to the Las Vegas kickoff meeting in Feyrer. Rather, the Indictment alleges that, by the time that Chiesi allegedly launched the scheme alleged in Counts Five, Six, and Seven in 2008, Rajaratnam had already been pursuing his scheme with Ali Far for five years.
United States v. Attanasio, 870 F.2d 809 (2d Cir. 1989), and United States v. Saad, 380 F. Supp. 2d 286 (S.D.N.Y. 2005), are also distinguishable. The indictments in those cases charged defendants with offenses in furtherance of a specific common purpose. See Attanasio, 870 F.2d at 815 (various schemes that shared a "common purpose" of hiding co-defendant's income from illegal acts properly joined even though each defendant did not participate in all offenses charged); Saad, 380 F. Supp. 2d at 287-88 (securities fraud charges against CEO and CFO for falsely inflating company's revenues properly joined with charges against CEO alone for underreporting her compensation in SEC filings). Putting aside that a "plan cannot be called `common' [if one defendant] is the only one alleged to be aware of it", Menashe, 741 F. Supp. at 1138, Counts One and Six allege no more than that both Rajaratnam and Chiesi sought to enrich themselves by trading on inside information. That allegation amounts to little more than that both defendants separately conspired to commit the same offense. This is not a case where the two counts allege a plan to hide specific assets, see Attanasio, 870 F.2d at 815, or inflate the profits of a particular company, see Saad, 380 F. Supp. 2d at 287-88.
United States v. Cervone, 907 F.2d 332 (2d Cir. 1990) is also inapposite. The indictment in Cervone alleged a 102-count RICO conspiracy involving bribery of construction union officials by construction company officials. One defendant, Perna, was charged alone with two counts of labor bribery for making payments to a union official whose acceptance of the payments was charged as one of the predicate acts in the RICO conspiracy. Though this "link between Perna and the rest of the defendants [wa]s somewhat tenuous," the Second Circuit affirmed joinder. Cervone, 907 F.2d at 341.
Cervone, however, is distinguishable on the ground that, almost by definition, a RICO organization is one whose members share a common criminal purpose; the organization is one grand conspiracy. As such, Perna's combination with a top union official necessarily associated Perna with a common plan. Cf. United States v. Garcia, 848 F.2d 1324, 1333 (2d Cir. 1988), rev'd on other grounds, Gomez v. United States, 490 U.S. 858 (1989) ("[A]ll of the counts in the indictment concerning the non-RICO appellants were charged also in the RICO count as predicate racketeering acts against [other defendants]. Joinder of these defendants in the same indictment was therefore proper under Fed.R.Crim.P. 8(b), even though multiple conspiracies were charged and even though some defendants were not named in all the conspiracy counts, which also constituted RICO predicate offenses, or in the overarching RICO count.") "Indeed, a construction of Rule 8(b) that required a closer relationship between transactions than that necessary to establish a `pattern of racketeering activity' under RICO might possibly prohibit joinder in circumstances where Congress clearly envisioned a single trial." United States v. Weisman, 624 F.2d 1118, 1129 (2d Cir. 1980), cert. denied, 449 U.S. 871 (1980).
2. Counts Two and Three
Counts Two and Three have no more in common with Count Five, Count Six or Count Seven than Count One does. As noted, Count Two alleges that, from January 2006 to July 2007, Rajaratnam conspired with Roomy Khan to trade on the basis of inside information regarding Polycom, Hilton, and Google. ( See Indictment at ¶ 11.) Count Three alleges that, from 2007 to some time in 2009, Rajaratnam conspired with Rajiv Goel to trade on the basis of inside information regarding Intel. ( See id. at ¶ 18.)
Counts Two and Three are improperly joined with Count Five. Neither Count Two nor Count Three identifies any of the same people as Count Five: Count Two identifies Rajaratnam and Khan and Count Three identifies Rajaratnam and Goel, but Count Five identifies Chiesi and CC-1. Both Count Two and Count Three involve information about different companies than the companies whose information is at issue in Count Five: Count Two relates to trading in Polycom, Hilton, and Google and Count Three relates to trading in Intel, but Count Five alleges trading in IMB, AMD, Sun, and "other companies." No other count in the Indictment describes any other similarity between either Count Two or Count Three, on the one hand, and Count Five on the other. In fact, Counts Three and Five do not even overlap in time. Count Three alleges that the Rajaratnam-Goel scheme ended in 2007 — before the scheme involving Chiesi and CC-1 alleged in Count Five even began. That is further evidence that joinder is improper. See Giraldo, 859 F. Supp. at 54.
Counts Two and Three are also improperly joined with Count Seven. Count Seven involves Chiesi and Kurland, but not Rajaratnam, Khan or Goel. Count Seven alleges insider trading regarding IMB, AMD, Sun Microsystems, and "other companies"; Count Two alleges insider trading regarding Polycom, Hilton, and Google and Count Three alleges insider trading regarding Intel. Again, the fact that all three counts charge insider trading conspiracies is not a basis for joinder under Rule 8(b), see Turoff, 853 F.2d at 1042, particularly where Count Seven alleges that the Chiesi-Kurland Scheme did not begin until after the scheme alleged in Count Three had ended. See Giraldo, 859 F. Supp. at 54.
Finally, Counts Two and Three are also improperly joined with Count Six. All three counts charge conspiracies involving Rajaratnam, but "the mere existence of similarities between some of the actors or some of the crimes committed will not suffice" for joinder under Rule 8(b). Carrozza, 728 F. Supp. at 270. Neither Count Two nor Count Three even mentions Chiesi, so, on the face of the indictment, Chiesi "had no involvement in the other schemes charged" for purposes of a comparison with Count Six. Lech, 161 F.R.D. at 257. Nothing elsewhere in the Indictment alleges that Chiesi even knew anything about Counts Two or Three. Hence any plan Rajaratnam may have had with respect to these counts "cannot be called `common', since he is the only one alleged to be aware of it." Menashe, 741 F. Supp. at 1138; see also Kouzmine, 921 F. Supp. at 1133. Moreover, Count Six alleges that the Chiesi-Rajaratnam scheme did not begin until 2008 — a year after the Rajaratnam-Goel scheme had ended. Since the Indictment does not indicate any "substantial identity of facts or participants" or "a common plan or scheme", Counts Two and Three and improperly joined with Count Six.
For the same reason that Counts Two and Three are improperly joined with Counts Five, Six, and Seven, Counts Two and Three are improperly joined with Counts Ten, Thirteen, and Fifteen and also improperly joined with Counts Eleven, Twelve, Fourteen, and Sixteen. Likewise, those counts are improperly joined with Counts Eight, Nine, Seventeen and Nineteen, the substantive counts of insider trading in Intel, Clearwire, and PeopleSupport associated with Count Three.
3. Count Four
Whether Count Four is properly joined with any of the counts charging Chiesi presents a closer question. Count Four alleges that, from some time in 2003 to October 2009, Rajaratnam conspired with Anil Kumar to trade on the basis of inside information regarding AMD, ATI and eBay. ( See Indictment at ¶ 25.) Count Four has something more in common with Count Six than any of Counts One, Two, or Three because both Count Four and Count Six allege that Kumar passed inside information regarding AMD to Rajaratnam. Count Six adds the allegation that Rajaratnam passed some information regarding AMD he had received from Kumar on to Chiesi and that Chiesi traded on that information. ( See id. at ¶ 38.) Hence in order to prove both Counts Four and Six against Rajaratnam and Count Six against Chiesi, the government will introduce evidence that Kumar had duties of trust and confidence to AMD and that Kumar violated those duties by passing inside information to Rajaratnam. That is, evidence at the trial of one offense in some part "would essentially duplicate the evidence at the other." Feyrer, 33 F.3d at 114. Moreover, in proving Count Six, the government will introduce evidence that Chiesi traded on information that she received from Rajaratnam by way of Kumar that she "knew had been misappropriated in breach of the duties of confidentiality." (Indictment at ¶ 41.) Therefore, this is not a case where "at most, [s]he had cursory knowledge of the other criminal activities. . . ." Lech, 161 F.R.D. at 257. Rather, given that "[a] quid pro quo was exchanged between the[] participants" in Counts Four and Six, it seems more likely that "one scheme stemmed from the other" or was "part and parcel" of the other. Turoff, 853 F.2d at 1044.
Rajaratnam argues that there is no allegation in the Indictment that the information Rajaratnam allegedly passed to Chiesi in Count Six was among the information that Count Four alleges Rajaratnam received from Kumar. ( See Rajaratnam Reply Br. at 4.) It is, of course, possible that Count Four charges Rajaratnam with receiving different information than he is charged with receiving and passing on in Count Six. But insisting on that level of specificity loses sight of the balance implicit in Rule 8(b). The test for joinder "[can]not [be] so all-encompassing as substantially to prejudice the accused" but it also "must be broad enough to maintain `efficient' justice. . . ." Turoff, 853 F.2d at 1039. Hence courts do not ask whether two counts charge identical conduct but instead apply "a common sense rule to decide whether, in light of the factual overlap among charges, joint proceedings would produce sufficient efficiencies such that joinder is proper notwithstanding the possibility of prejudice. . . ." Rittweger, 524 F.3d at 177 (internal quotation marks omitted). Joinder of Counts Four and Six properly strikes that balance.
For the same reason, Count Eighteen is properly joined with Counts Ten, Thirteen, and Fifteen.
It follows that Counts Four and Five are also properly joined. That might not be apparent on the face of these counts considered in isolation. Indeed, Counts Four and Five do not identify any of the same people: Count Four identifies Rajaratnam and Kumar; Count Five identifies Chiesi and CC-1. The two counts also involve different companies: Count Four involves ATI and eBay while the scheme alleged in Count Five does not and that scheme also involves Akamai, IBM, and Sun while the scheme alleged in Count For does not. Both Counts Four and Five do at least in part allege schemes to trade on inside information regarding AMD, but that fact alone does not mean that Counts Four and Five are properly joined. Had Counts Four and Five charged conspiracies to sell cocaine rather than inside information, there would be no case for joinder on the ground that both charged defendants were selling the same illegal drug, even if the conspiracies allegedly involved one common individual. See Giraldo, 859 F. Supp. at 54. But Counts Four and Five do not even share that much and severance cannot turn on whether the indictment charges schemes to sell information or drugs.
However, where Counts Four and Six are properly joined, looking at Counts Four and Five alone defies "common sense." Feyrer, 333 F.3d at 114. With respect to Counts One, Two, and Three, nothing elsewhere on the face of the Indictment referred to any of the allegations made in those counts. Accordingly, comparing those counts to others in isolation was no different than reading the indictment as a whole. That is not the case with respect to Counts Four, Five, and Six. Count Six alleges that Chiesi received some information regarding AMD from CC-1; that Chiesi passed that information to Rajaratnam; and that Rajaratnam traded on the basis of that information which he "knew had been misappropriated in breach of the duties of confidentiality." (Indictment at ¶ 41.) Thus, language on the face of the Indictment alleges that Rajaratnam knew about a scheme identical to the one charged in Count Five.
That distinguishes the comparison between Count Four and Count Five from the above comparisons of Counts One, Two, and Three to Count Five. Nothing in the Indictment alleged that Chiesi knew anything about those counts. Where the government can try Rajaratnam and Chiesi together for Counts Four and Six, and Count Six alleges that Rajaratnam knew about and benefitted from either the conspiracy alleged in Count Five or one identical to it, "joint proceedings would produce sufficient efficiencies such that joinder is proper notwithstanding the possibility of prejudice. . . ." Rittweger, 524 F.3d at 177.
The same is true for Counts Four and Seven. To prove Count Seven, the government will introduce much of the same evidence to prove Counts Five and Six, namely, evidence that Chiesi received some information regarding AMD from CC-1 and some information from the Akamai Source. Count Six alleges that Rajaratnam knew those facts and received information from the same sources. Of course, proving Count Seven would also involve showing that Chiesi passed information to Kurland as well as to Rajaratnam — facts that are hardly on all fours with a Rajaratnam-Kumar scheme involving AMD, ATI, and eBay. Nor is there any allegation in the Indictment that Rajaratnam knew that Chiesi tipped Kurland as well as himself. And it is a fine distinction between concluding, on the one hand, that Chiesi's ignorance that Rajaratnam also had other tippers is fatal to severance, and, on the other, that Rajaratnam's ignorance that Chiesi also tipped others is not fatal to severance.
For the same reasons discussed below, Count Eighteen is properly joined with Counts Eleven, Twelve, Fourteen, and Sixteen.
But the test for joinder in this Circuit requires "a substantial identity of facts" not a perfect identity of facts. Cervone, 907 F.2d at 341 (emphasis added). That is because the standard "must be broad enough to maintain `efficient' justice. . . ." Turoff, 853 F.2d at 1039. Hence joinder is proper where "[p]roof of one scheme [i]s helpful to a full understanding of the other." Biaggi, 909 F.2d at 676. Since Counts Five and Six allege essentially the same schemes involving Chiesi and CC-1 and the Akamai Source, proving those schemes would be helpful in understanding what is at least an identical if not the same scheme alleged in Count Seven. And given that the government can try counts Five and Six with Count Four, severing Count Seven from Count Four would require the government to prove most of Count Seven twice: once at a trial of Counts Four, Five, and Six and again at a trial of Count Seven alone. But "[t]he government should not be put to the task of proving what is essentially the same set of facts more than once." Halper, 590 F.2d at 430.
That distinguishes joinder of Count Four with Count Seven from joinder of Counts One, Two, and Three with Count Five, Six, or Seven. The fact that Counts Four, Five, and Six are properly joined does not make adding Count One, Two, or Three any more efficient. Given that those counts involve sources and companies that have nothing in common with any of the other charges, the government would prove virtually the entirety of those charges separately. Severing Counts One, Two, and Three from the others therefore reflects that Rajaratnam "performed the overwhelming majority of his illegal transactions independently", Carrozza, 728 F. Supp. at 271, whereas Chiesi's solo tipping of Kurland is only a fraction of the allegations against her with which Rajaratnam is connected. Since the "core" of the properly joined charges here involves allegations regarding tipping by two sources, Rule 8(b) does not require severance of a count that includes those allegations merely because it also makes other allegations. See Biaggi, 909 F.2d at 676 (affirming joinder of tax charges related to extortion and bribery conspiracy involving co-defendants with tax charges against only one defendant unrelated to the same extortion conspiracy).
4. Count Five
As discussed above, Count Five is properly joined with Count Four and defendants do not contest that Count Five is properly joined with Count Seven. As also discussed above, Count Five is not properly joined with Counts One, Two and Three. It remains to be determined whether Count Five is properly joined with Count Six.
Count Five is properly joined with Count Six for the same reason that Count Four is properly joined with Count Six. Count Five alleges that, from August 2008 to April 2009, Chiesi conspired with CC-1, a former employee of IBM, and others, to trade on inside information regarding IBM, AMD, Sun, and "other companies." (Indictment at ¶¶ 31-32.) Count Six also makes this allegation and adds the allegation that Chiesi passed some information regarding AMD to Rajaratnam and that Rajaratnam traded on that information. ( See id. at ¶ 38.) Hence in order to prove both Count Five against Chiesi and Count Six against Rajaratnam, the government will introduce evidence that CC-1 had duties of trust and confidence to AMD and that CC-1 violated those duties by passing inside information to Chiesi. And, as noted above, in proving Count Six, the government will introduce evidence that Rajaratnam traded on information that he received from Chiesi via CC-1 that he "knew had been misappropriated in breach of the duties of confidentiality." (Indictment at ¶ 41.) Therefore, this is not a case where "at most, he had cursory knowledge of the other criminal activities. . . ." Lech, 161 F.R.D. at 257. Rather, both counts share "a substantial identity of facts or participants" and are properly joined.
5. Count Six
As noted above, Count Six is properly joined with Counts Four and Five but not properly joined with Counts One, Two, and Three. It remains to be determined whether Count Six is properly joined with Count Seven. The answer to that question is yes because those counts have even more in common than Counts Five and Six. Not only do they both allege that Chiesi received information from CC-1 regarding AMD in violation of a duty of trust and confidence, but both allege that Chiesi received information from the Akamai Source in violation of a duty of trust and confidence. If the fact that Count Seven also alleges that Chiesi tipped Kurland and also involves IBM and Sun is not fatal to joinder of Counts Five and Seven, it is not fatal to joinder of Counts Six and Seven that have more in common. Again, Rule 8(b) does not require a perfect identity of allegations but instead embodies a balance between efficient justice and minimal prejudice. Where Counts Five and Seven share a common core of allegations regarding tipping by the same two sources regarding the same companies, joinder strikes the required balance.
6. Count Seven
As discussed above, Count Seven is improperly joined with Counts One, Two, and Three but properly joined with Counts Four, Five and Six.
B. Rule 14
Joinder of Counts Four, Five, Six and Seven (and their associated substantive counts) is nevertheless improper "[if] it appears that a defendant or the government is prejudiced by joinder." Fed.R.Crim.P. 14(a). That assessment necessarily depends on the evidence likely to be introduced at trial. However, neither Rajaratnam nor Chiesi has demonstrated "a serious risk that a joint trial would compromise a specific trial right of one of the defendants, or prevent a jury from making a reliable judgment about guilt or innocence." Zafiro, 506 U.S. at 539.
Both Rajaratnam and Chiesi argue that they will be prejudiced by the admission of so-called "spillover" evidence, that is, evidence admissible against one defendant but not the other. They argue that the danger is particularly acute given the size and scope of the evidence the government intends to introduce against Rajaratnam. ( See, e.g., Chiesi Br. at 13.) Having concluded that Rule 8(b) requires severance of Counts One, Two, and Three, the Court need not address their joinder under Rule 14. But it is worth noting that defendants' Rule 14 arguments are well taken with respect to Counts One, Two, and Three. Those charges have nothing to do with Chiesi and involve dozens of different stocks and multiple other sources. Trying those charges with the others would create the risk that "[t]he jury is subjected to weeks of trial dealing with dozens of incidents of criminal misconduct which do not involve [Chiesi] in any way" such that "mounting proof of the guilt of one is likely to affect another." United States v. Branker, 395 F.2d 881, 888 (2d Cir. 1968) (quotation marks omitted).
However, the same arguments are misplaced where "much of the evidence about [one defendant's] crimes would have been admissible at a separate trial of [the other], since it was relevant to proving the nature and scope of the conspiracy in which both were, to differing degrees, involved." United States v. Spinelli, 352 F.3d 48, 55-56 (2d Cir. 2003); see also United States v. Salameh, 152 F.3d 88, 115 (2d Cir. 1998) ("A defendant's claim that he was prejudiced by the admission of evidence at a joint conspiracy trial is insupportable when the evidence would have been admissible against him in a separate trial alone as a member of the conspiracy."). That is the case with respect to Counts Four, Five, Six, and Seven. Evidence that (a) Kumar obtained information regarding AMD in violation of a duty of trust and confidence and (b) passed that information to Rajaratnam appears probative of both the charges against Rajaratnam in Count Four and the charges against Chiesi in Count Six. Similarly, evidence that (a) CC-1 and the Akamai Source obtained information regarding AMD and Akamai in violation of duties of trust and confidence and (b) passed that information to Chiesi appears probative of both the charges against Chiesi in Counts Five, Six and Seven and the charges against Rajaratnam in Count Six. Presenting this evidence at a joint trial is unlikely to prejudice either defendant. See Rosa, 11 F.3d at 341.
That is not to say that all the evidence against one defendant will be admissible against the other. But "the fact that evidence may be admissible against one defendant but not another does not necessarily require a severance." Carson, 702 F.2d at 367. As noted, limiting instructions may be sufficient to address any prejudicial spillover that may result from a multi-defendant, multi-count trial. See Santiago, 174 F. Supp. 2d at 22.
A limiting instruction is particularly likely to prevent any prejudice where much of the evidence that Kumar tipped Rajaratnam and/or that CC-1 or the Akamai Source tipped Chiesi will be presented in the form of wiretaps. See Cervone, 907 F.3d at 342 (finding that indictment where charges "were based largely on recorded phone calls . . . was not a case . . . in which spillover might influence a jury to attribute criminal intent to ambiguous conduct associating a particular defendant with a conspiracy"). What is more, proof that Rajaratnam and/or Chiesi actually traded or caused others to trade on the basis of inside information should consist largely of trading records. Those records themselves should distinguish between the stocks and persons involved. While some risk of prejudice exists in the joint trial of any defendants charged, in part, with separate crimes, the Court is not persuaded here that there is "a serious risk that a joint trial would compromise a specific trial right of one of the defendants, or prevent a jury from making a reliable judgment about guilt or innocence." Zafiro, 506 U.S. at 539.
* * * *
In a joint trial of Rajaratnam and Chiesi, conspiracy Counts One, Two, and Three can be joined with each other but are improperly joined with conspiracy Counts Four, Five, Six, and Seven, all of which may be tried together. As a result, Counts One, Two, and Three (as well as substantive Counts Eight, Nine, Seventeen, and Nineteen) must be severed from Counts Four, Five, Six and Seven (and substantive Counts Ten, Eleven, Twelve, Thirteen, Fourteen, Fifteen, Sixteen, and Eighteen). In the alternative, the government could separately try Rajaratnam on Counts One, Two, Three, Four and Six (and related substantive counts), while trying Chiesi separately on Counts Five, Six, and Seven (and related substantive counts). The Court therefore invites the parties to promptly submit their views on which course to choose for the trial of the charges in this case.
CONCLUSION
For the reasons above, defendants' motions [50, 55] to sever the Indictment are GRANTED in part and DENIED in part.
SO ORDERED.