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White Collar Defense & Compliance Developments in Criminal Law, Federal Case Law and Statutory Developments

Securities Fraud Conviction Reversed Because Trial Court Failed To Allow Defendant To Introduce Co-Defendant’s Prior Deposition Testimony Before CFTC

Posted in Evidence, Trial tactics

Alain Leibman writes:

Often, the government finds itself desirous of introducing the prior civil deposition testimony of a witness who is unavailable for trial, occasionally because the witness is deceased or cannot be located. but more often because the witness has asserted a Fifth Amendment objection to his/her compelled testimony. Sometimes, though, it is the defendant who seeks to introduce such prior deposition testimony. In either circumstance, application of Federal Rule of Evidence 804(b)(1) requires a trial court to determine whether the deposition testimony is being offered against a criminal party who enjoyed in the civil case an opportunity, and a similar motive, to develop that testimony.

So, when prior deposition testimony is offered by the government against a criminal defendant who was a civil defendant in the earlier case, those elements are rather easily met. Not so when the offeror is a criminal defendant, because the United States cannot usually be said to have had an opportunity to develop testimony in a civil litigation to which it was not a party, nor can it be said that it shares a motivation with an unaffiliated civil party seeking money. That is, unless an agency of the United States was a litigant in the prior civil case.

In United States v. Sklena, 2012 WL 3608583 (7th Cir., Aug. 23, 2012), the defendant was a trader at the Chicago Board of Trade, charged with conspiring to commit fraud with another trader named Sarvey in a series of rigged trades involving Sarvey’s customer accounts. Sarvey was originally charged as a co-defendant, but died before trial. Before he died, however, Sarvey was also deposed as a civil defendant in a regulatory action brought by the CFTC against both of them. In his deposition testimony, Sarvey exculpated Sklena in various respects. So, when Sklena was criminally charged and went to trial, he sought to introduce the now-unavailable Sarvey’s deposition testimony in his defense, but the trial court would not permit it, and convicted Sklena in a bench trial.

The Seven Circuit held that the deposition testimony was erroneously excluded. On the first element – opportunity to have developed the earlier testimony – the Court of Appeals acknowledged that there was "very little law on the question whether two government agencies" should be considered the same party in terms of the opportunity to have developed the earlier testimony. There were, however, several factors which suggested a sufficient connectedness between the CFTC and the Department of Justice to make them the same party for purposes of the Rule: the CFTC was statutorily required to report its litigation activities to the Department; and the agencies closely coordinated their roles in enforcement. Their connection "would be even more clear if the Department had litigating authority for the agency," which it does not, but the appeals court held that this criterion was not dispositive.

As to the second element – similarity of motive – this finding turns on a number of factors, including the substantive law that each agency is enforcing; the factual overlap between the two proceedings; the type of proceeding; the potential associated penalties; and any differences in the number of issues and parties. These factors, the court held, in this case supported the conclusion that the two agencies did indeed enjoy similar motives to develop Sarvey’s deposition testimony, given the same underlying conduct being investigated by both agencies with a joint objective toward taking enforcement action. The fact that the first action was civil and the second criminal did not augur a different result, since the deterrent effect of a large civil penalty would be quite similar to that of a criminal sentence.

Accordingly, the trial court should have admitted the deposition testimony, and Sklena’s conviction was reversed.
 

(Alain Leibman, Esq., the author of this entry and a co-author of this blog, is a partner with Fox Rothschild LLP, based in our Princeton, NJ office. A former decorated federal prosecutor, he practices both criminal defense and commercial litigation in federal and state courts)