Just like you don’t get to pick your family, defendants accused of being members of a conspiracy have to live with one another, even though that means a jury may lump them together in deciding their guilt. Executives from the Stanford Financial Group charged with participating in a multibillion-dollar Ponzi scheme are learning this lesson as they deal with what one described in a legal brief as the “circus” surrounding their co-defendant, R. Allen Stanford, the firm’s founder.
White-collar crime prosecutions usually involve multiple defendants, and a conspiracy charge is often at the heart of the case. That charge means a single trial involving all the defendants, even though they may have differing levels of culpability and one may be the lightning rod in the case.
Laura Pendergest-Holt, former chief investment officer at Stanford Financial, filed a motion last week asking to have her trial severed from her co-defendant because of what she called the “egregious and circus-like conduct” created by Mr. Stanford and his current lead counsel. Indeed, her brief uses the word “circus” no fewer than eight times in describing what has taken place in court.
Two other co-defendants, the firm’s former chief accounting officer and its controller, have joined her severance motion, trying to put as much distance as they can between their trials and Mr. Stanford’s.
Under Federal Rule of Criminal Procedure 8(b), prosecutors can charge defendants in a single indictment if they participated “in the same series of acts or transactions.” A conspiracy charge is the typical means for bringing different defendants together into a single case because it can be such a wide-ranging offense, sometimes covering years of conduct. So long as the government shows there is a reasonable basis to believe each defendant participated in the criminal agreement, they can be tried together.
There are many dangers to defendants in a joint trial, the most significant being the potential “spillover effect” from the evidence showing the culpability of other members of the conspiracy. Under conspiracy law, the acts of each accused conspirator can be used against all the other accused members.
Especially when one defendant is controversial, jurors may focus on that person and view the others as simply trailing the leader’s wake. Once convinced of the primary defendant’s guilt, it is easy for a jury to conclude that the others should be convicted.
A co-conspirator can seek to have the trial severed from other defendants under Rule 14(a) if a joint trial “appears to prejudice” the person. Of course, prejudice does not mean just that the jury is more likely to convict if they are tried together, so a defendant asking for a severance has the burden of showing significant problems that would call into doubt whether the person could receive a fair trial.
Mr. Stanford’s defense has been rather disorganized to this point, and his conduct in court has not gone over well with Judge David Hittner in Federal District Court in Houston, who is presiding over the criminal case. The Wall Street Journal recently noted that 10 different law firms had represented Mr. Stanford since the Securities and Exchange Commission first filed civil fraud charges in February 2009 accusing Stanford Financial of operating a Ponzi scheme.
Unfortunately for Ms. Pendergest-Holt and her co-defendants, the actions of Mr. Stanford may not be enough to have their case separated from his. Judges have a strong preference for conducting a single trial when the bulk of the evidence will be the same for each defendant.
There is a much stronger case for granting the severance motions in the insider trading prosecution of Raj Rajaratnam, the billionaire founder of the Galleon Group hedge fund, and Danielle Chiesi, his indicted co-conspirator. In that case, the government contends there were seven different conspiracies to trade on information in different companies from a variety of sources, but only one conspiracy charge accuses both defendants of agreeing to trade on inside information. There is significantly less overlap in the Galleon case, so they have a better chance of winning their motions.
In the Stanford prosecution, all of the defendants are named in the primary conspiracy, mail fraud and wire fraud counts, and there appears to be a significant overlap in the evidence against them. Ms. Pendergest-Holt is also named along with Mr. Stanford in additional counts alleging obstruction of justice, an even greater confluence of the evidence that will be used against them at trial.
The government is likely to strongly oppose the severance motion because it does not want to expose its witnesses, particularly the former chief financial officer of Stanford Financial, who is cooperating in the case, to multiple court appearances to testify.
Even when there is overlapping evidence, judges are more sympathetic to a severance motion when it appears that a joint trial puts the defendants in the position of offering antagonistic defenses, such as when each blames the other for pulling the trigger.
The conflict described in Ms. Pendergest-Holt’s brief between Mr. Stanford and his co-defendants appears to focus more on how his conduct makes it difficult to trust how he will act at trial and less on what their actual defenses to the charges will be.
While Ms. Pendergest-Holt and her co-defendants may try to shift as much blame as possible on to Mr. Stanford, that could require them to testify in order to point the finger at him. That is always dangerous because the jury could perceive them as taking the easy way out once they were caught and conclude that they all acted together.
Even when there is blame-shifting among the defendants, courts usually reject a request for separate trials and instead rely on jury instructions that the evidence against each must be weighed separately. Whether that keeps a jury from lumping the whole group together is an open question.
It is often the case that defendants in white-collar crime prosecutions cooperate on their defense and even enter into a joint defense agreement in order to present a united front. That is certainly not the case here, as Mr. Pendergest-Holt and her co-defendants want to avoid having Mr. Stanford dominate the trial and, if he chooses to testify, come across poorly to a jury.
While a joint trial would certainly make it more difficult for the other defendants to avoid the taint of being linked to Mr. Stanford, this is not the type of prejudice under Rule 14(a) likely to lead separate trials involving the same core of evidence. Judges do not want to listen to the same evidence all over again when the case can be tried once, even if that comes at the cost of putting antagonists together at the defense table.