Opinion ID: 510033
Heading Depth: 2
Heading Rank: 1

Heading: Joinder of the Mail Fraud and Tax Fraud Charges Against

Text: Turoff and the Silvers 19 Prior to trial, appellants moved to sever the tax fraud charges from the mail fraud charges arising from the Compumeter scheme. The district court denied the motion, noting that [a]t a minimum, the proof of the two alleged schemes will overlap, because the government charges that the tax law violations stem from the defendants' ill-gotten gains in the Compumeter scheme. United States v. Turoff, 652 F.Supp. 707, 711 (E.D.N.Y.1987). After this denial of severance, the prosecutor called to Judge Glasser's attention that defendants Alan Silver and Harriet Silver were charged with failing to report interest income derived from sources other than the Compumeter scheme charged in the mail fraud counts. The Silvers responded by renewing their severance motion. Concluding that joinder would be appropriate if the prosecution could prove that the Silvers' tax violations were the products of an overall corrupt relationship among the defendants and Hyfin, Judge Glasser again denied the motion. See United States v. Turoff, 691 F.Supp. 607 (E.D.N.Y. 1987) (Supplemental Memorandum and Order). Appellants now challenge their convictions upon the ground that joinder of the tax fraud charges with the mail fraud charges was improper under Fed.R.Crim.P. 8.
20 The principal question is whether an indictment against multiple defendants joining these different sets of charges--each of which involves an alleged conspiracy and alleged substantive crimes--is proper under Fed.R.Crim.P. 8. Unlike review of a motion made pursuant to Rule 14 (severance of counts as relief from prejudicial joinder of defendants or offenses) or Rule 13 (joinder at trial of separate indictments against multiple defendants) for abuse of discretion, the propriety of joinder under Rule 8 raises a question of law and is subject to full appellate review. United States v. Lane, 474 U.S. 438, 106 S.Ct. 725, 732 n. 12, 88 L.Ed.2d 814 (1986) (Rule 8(b)); United States v. Werner, 620 F.2d 922, 926 & n. 5 (2d Cir.1980); United States v. Granello, 365 F.2d 990, 995 (2d Cir.1966), cert. denied, 386 U.S. 1019, 87 S.Ct. 1367, 18 L.Ed.2d 458 (1967). If joinder should not have been permitted, a conviction must be reversed, unless failure to sever was harmless error. Lane, 106 S.Ct. at 730-32; Werner, 620 F.2d at 926; Granello, 365 F.2d at 995. 21 Rule 8(a) permits joinder of offenses against a single defendant in three circumstances: offenses may be joined in a single indictment when they are (1) based on the same act or transaction, or (2) based on two or more acts or transactions connected together or constituting parts of a common scheme or plan, or (3) of the same or similar character. Fed.R.Crim.P. 8(a). Each of these tests for when offenses may be tried together reflects a policy determination that gains in trial efficiency outweigh the recognized prejudice that accrues to the accused. See Werner, 620 F.2d at 929. 22 Rule 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). Unlike Rule 8(a), Rule 8(b) does not permit joinder of defendants solely on the ground that the offenses charged are of the same or similar character. Thus, though both subdivisions of Rule 8 focus on the nature of the acts constituting the alleged offenses, 8(b) provides a more restrictive test when multiple defendants are involved. See Granello, 365 F.2d at 993-94.
23 Rule 8 does not explicitly provide a standard that governs when multiple offenses and multiple defendants are joined in one indictment. One logical approach would invoke Rule 8(a) when defendants seek severance of offenses, which is the case here, and Rule 8(b) when defendants seek severance of defendants, which is not this case. We have permitted multiple defendants facing multiple charges to move for either type of severance, but we invoke only Rule 8(b) to test the validity of joinder regardless of which type of severance is sought. As the district court recognized, our cases indicate that  'when a defendant in a multiple-defendant case challenges joinder of offenses, his motion is made under 8(b) rather than 8(a).'  652 F.Supp. at 710 (quoting United States v. Papadakis, 510 F.2d 287, 300 (2d Cir.), cert. denied, 421 U.S. 950, 95 S.Ct. 1682, 44 L.Ed.2d 104 (1975)); see United States v. Turbide, 558 F.2d 1053, 1061 n. 7 (2d Cir.), cert. denied, 434 U.S. 934, 98 S.Ct. 421, 54 L.Ed.2d 293 (1977); 1 C. Wright, Federal Practice and Procedure Sec. 144, at 494 (2d ed. 1982). The effect of construing Rule 8 in this fashion is that multiple defendants cannot be tried together on two or more similar but unrelated acts or transactions; multiple defendants may be tried together only if the charged acts are part of a series of acts or transactions constituting an offense or offenses. See 1 C. Wright, supra, Sec. 144, at 508-09. 24 Sound policy reasons underlie this distinction. The use of Rule 8(a) to join offenses against a single defendant inevitably involves some danger of prejudice. See Werner, 620 F.2d at 929 (substantial prejudice must be shown before severing trials under Rule 14 because Rule 8 authorizes some prejudice). Despite this potential for unfairness, Congress has authorized consolidation in the belief that public considerations of economy and speed outweigh possible unfairness to the accused. United States v. Smith, 112 F.2d 83, 85 (2d Cir.1940) (commenting on former 18 U.S.C. Sec. 557, which is substantially restated by Rule 8(a)); see United States v. Barrett, 505 F.2d 1091, 1106 (7th Cir.1974) (Obviously any adding of offenses to others is prejudicial to some extent.), cert. denied, 421 U.S. 964, 95 S.Ct. 1951, 44 L.Ed.2d 450 (1975). Rule 8(b) reflects a similar policy. Juxtaposing these two rules, the District of Columbia Circuit summarized them, stating 25 When similar but unrelated offenses are jointly charged to a single defendant, some prejudice almost necessarily results, and the same is true when several defendants are jointly charged with a single offense or related offenses. Rule 8(a) permits the first sort of prejudice and Rule 8(b) the second. But the Rules do not permit cumulation of prejudice by charging several defendants with similar but unrelated offenses. 26 Cupo v. United States, 359 F.2d 990, 993 (D.C.Cir.1966) (footnote omitted), cert. denied, 385 U.S. 1013, 87 S.Ct. 723, 17 L.Ed.2d 549 (1967). Thus, multiple defendants may be charged with and tried for multiple offenses only if the offenses are related pursuant to the test set forth in Rule 8(b), that is, only if the charged acts are part of a series of acts or transactions constituting ... offenses.
27 As the district court recognized,  'tax counts can properly be joined with non-tax counts where it is shown that the tax offenses arose directly from the other offenses charged.'  652 F.Supp. at 711 (quoting United States v. Kopituk, 690 F.2d 1289, 1313 (11th Cir.1982), cert. denied, 461 U.S. 928, 103 S.Ct. 2089, 77 L.Ed.2d 300 (1983)). The most direct link possible between non-tax crimes and tax fraud is that funds derived from non-tax violations either are or produce the unreported income. See United States v. Kenny, 645 F.2d 1323, 1344 (9th Cir.) ([T]he tax evasion charges ... arose directly and solely out of unreported income flowing from the illicit contracting activities.), cert. denied, 452 U.S. 920, 101 S.Ct. 3059, 69 L.Ed.2d 425 (1981). However, if the character of the funds derived do not convince us of the benefit of joining these two schemes in one indictment, other overlapping facts or issues may. 28 In this case, the funds that formed the basis of the unreported income, with one exception, were not derived directly from the Compumeter scheme. The only evidence of a direct connection is that Turoff accepted two $15,000 payments from Lee in 1984 for his role in the Compumeter scheme. These funds were part of the 1984 closing balance in his Hyfin account that earned $4,695.19 of unreported interest. As for the Silvers, the government conceded before trial that they were charged with failing to report interest income derived from sources other than the scheme charged in the mail fraud counts. United States v. Turoff, No. 86 Cr. 00422, supra. For this reason, identity of funds derived from the Compumeter conspiracy and those funds unreported in the tax fraud schemes does not provide the essential connection for joinder under 8(b). 29 Yet, there is a key link between the two offenses--one scheme stemmed from the other--and that link provides a sound basis for joinder under Rule 8(b). Appellants and their cohorts manipulated the Hyfin accounts simultaneously to advance the Compumeter scheme and to accumulate unreported income. The acts involved in each scheme have more than a temporal and spatial relationship. See United States v. Jackson, 562 F.2d 789, 796 (D.C.Cir.1977). Significantly, the tax fraud hinged on the fraudulent activities taken to advance the Compumeter conspiracy. Consequently, the proof of one scheme is indispensable for a full understanding of the other. 30 A quid pro quo was exchanged between these participants, each giving something of value to enhance the Compumeter mail fraud scheme with the expectation of some financial benefit in return. And these financial benefits were part and parcel of the tax fraud. Cf. United States v. Korfant, 771 F.2d 660, 663 (2d Cir.1985) (distinct unrelated conspiracies for double jeopardy purposes where success or failure of one is independent of the corresponding success or failure of the other). From the inception of his relationship with Lee, Turoff's budding misuse of his position as Taxi Commission Chairman and his unreported Hyfin account income went hand in hand. For instance, Lee reduced the interest rate on several of Turoff's loans in exchange for a promise from Turoff that Hyfin would handle exclusively the financing of Compumeter purchases. Again, for example, Harriet Silver opened eight Hyfin accounts for the express purpose of allowing Lee to funnel into them loan proceeds involved in the Compumeter scheme. And, at the same time, the Silvers opened the Hyfin accounts used to commit the tax fraud. Thus, the Hyfin accounts were used to facilitate the personal and financial relationships that enabled the Compumeter scheme to proceed. Although the actual unreported income was largely (in Turoff's case) or wholly (in the Silvers' case) earned from deposits unrelated to the Compumeter scheme, these accounts served in some measure as a tie connecting appellants to each other, to Lee, and to both schemes. Lee, of course, was the crucial figure overseeing the manipulation of the Hyfin bank accounts, and it was these accounts that served as the channels for illegal activity. 31 In sum, applying a commonsense rule to these facts, we conclude that a reasonable person would easily recognize the common factual elements that permit joinder of the mail fraud charges and the tax fraud charges in one indictment. Therefore, the charges were properly joined under Rule 8(b).