United States v. Santiago

29 F. Supp. 3d 232, 2014 WL 2931848
CourtDistrict Court, E.D. New York
DecidedJune 27, 2014
DocketNo. 05 CR 590(ILG)
StatusPublished
Cited by1 cases

This text of 29 F. Supp. 3d 232 (United States v. Santiago) is published on Counsel Stack Legal Research, covering District Court, E.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. Santiago, 29 F. Supp. 3d 232, 2014 WL 2931848 (E.D.N.Y. 2014).

Opinion

MEMORANDUM AND ORDER

GLASSER, District Judge:

Pending before this Court is Ms. Santiago’s petition for a writ of error coram nobis. An appreciation of the history, albeit an abridged one, which led to the filing of this petition, is a necessary prerequisite to an informed disposition of it.

In 2004, an investigation was commenced by the United States Attorney’s Office for the Eastern District of New York together with the United States Postal Service of a security fraud scheme involving stock brokers at Merrill Lynch in New York and Lehman Brothers in Florida. In essence, the scheme involved bro[234]*234kers who placed phone receivers upon what are known as “squawk boxes” which transmitted internal communications to third parties, day traders, who then used those communications to their trading and financial advantage by what is known as “front running.” Two of those brokers were employed by Merrill Lynch. They are Timothy O’Connell and Kenneth Ma-haffy. Irene Santiago was also employed by Merrill Lynch. Luring the time this investigation was underway, she worked as a client assistant for Mahaffy and O’Con-nell, but primarily for O’Connell. Her duties included answering the telephones and performing various administrative functions for him.

In the course of the investigation, the government sought to interview Ms. Santiago with a view of learning the details of how the internal information was disseminated throughout the offices of Merrill Lynch, and was then transmitted to the outside broker day-traders. The fact of the investigation and the request to interview Ms. Santiago became known to O’Connell and to Ben Grimaldi, who was the Chief Compliance Officer at the branch office of Merrill Lynch where Ms. Santiago worked. It is fair to say that having learned of Ms. Santiago’s pending interview, O’Connell and Grimaldi, whether separately or together, embarked on an effort to induce her to lie to the investigating federal agents and to the Grand Jury. They succeeded. O’Connell was convicted of Count 35 of an indictment which charged him with witness tampering; namely, knowingly, intentionally and corruptly persuading and misleading Ms. Santiago with the intent to influence and prevent her testimony in a Grand Jury investigation and to cause and induce her to withhold testimony from the Grand Jury and to prevent her from communicating information of securities fraud to federal agents. Ben Grimaldi pleaded guilty, to conspiring to commit witness tampering in precisely the same words in which O’Con-nell was charged.

Ms. Santiago pleaded guilty on August 5, 2005 to conspiring with O’Connell to obstruction of justice by testifying falsely before the Grand Jury. Reading the stark phrase “pleaded guilty to .... ” masks what lies behind it — O’Connell and Grimal-di, her supervisors, corruptly persuading her and inducing her to lie, to which she succumbed. Six days later, on August 11, 2005, Mahaffy, O’Connell, Ghysels and one other, the brokers, were indicted on 40 counts of securities fraud, Travel Act violation, false statements and witness tampering. Superseding indictments thereafter added four codefendant third party day-traders. 05 CR 613, Dkt. Nos. 47 and 63. The trial proceeded on one count of conspiracy to commit securities fraud, twenty counts of substantive securities fraud, one count of Travel Act violations, several counts of witness tampering, conspiring to commit witness tampering and making false statements. The trial, at which I presided, continued for seven weeks. The jury deliberated for one week. They acquitted all the defendants of the securities fraud and Travel Act counts, convicted O’Connell of witness tampering and making a false statement and were unable to reach a verdict on Count One, conspiracy to commit securities fraud, to which I declared a mistrial.

A retrial of all the defendants was held before Judge Gleeson on the one remaining count of conspiracy to commit securities fraud. The trial lasted for approximately three weeks. The government’s case proceeded on two theories in both, trials. The government claimed that the information made available via the squawk box to the third party day-traders was confidential, the property of the brokerage houses of which they were deprived and [235]*235deprived also of the honest services of their employees by their disclosure. The linchpin of each theory was the confidentiality of the information and the burden of the government’s presentation was addressed to that issue. The jury returned a verdict of guilty after deliberating for two days.

Not long after the defendants were sentenced, they became aware of thirty transcripts of depositions taken by the SEC, which was collaborating with the United States Attorney’s Office in the investigation leading up to the prosecution of this case. Those transcripts contained information which the government was obligated to make known to the defendants pursuant to Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), because it was material to guilt and its exculpatory value was obvious. It was information that contradicted the testimony of key government witnesses as to the confidentiality of the information at issue. The deposition testimony of a significant Merrill Lynch employee was that the information was not confidential at all and that there was nothing wrong with the transmission of that information by the brokers. See United States v. Mahaffy, 693 F.3d 113, 128-30 (2d Cir.2012). What is disturbing is that those transcripts were made known to the Assistant United States Attorneys prosecuting this case pri- or to the first trial but never disclosed to the defendants. Those transcripts were also known to the Assistant United States Attorneys prosecuting the second trial but were never disclosed by them either. 693 F.3d at 122-23. The motions for a new trial which inevitably followed were granted and the defendants’ convictions were ultimately vacated. More significant, however, is the agreement the government entered into with O’Connell to defer prosecuting him on a Fifth Superseding Indictment for a period of six months. Noting his successful completion of the deferral period, the government obtained an Order dismissing that Superseding Indictment. Dkt. No. 977. A similar Order dismissing that Superseding Indictment was obtained as to Ghysels who had also successfully completed a term of a deferred prosecution agreement. Dkt. No. 979. A deferred prosecution agreement has also been entered into with Mahaffy, the terms of which are not known to the Court. There being no request by the government as of yet to dismiss the superseding indictment, it is assumed that his deferral period has not as yet been completed.

Thus, O’Connell who was found guilty of the securities fraud about which he knowingly and intentionally corruptly persuaded Santiago to lie and withhold testimony from the Grand Jury, has his securities fraud conviction vacated and freed of the specter of being charged with that crime anew. The record of Mahaffy, the other principle defendant, will also similarly be sanitized.

I have provided a broad overview of the historical background believed to be necessary for an informed and just disposition of this motion. More important in my view, to a just disposition of this motion is a feel of the texture of the manipulation of Ms. Santiago which only a reading of portions of the record can provide.

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Bluebook (online)
29 F. Supp. 3d 232, 2014 WL 2931848, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-santiago-nyed-2014.