The opinion of the court was delivered by: NEWCOMER
A grand jury brought a thirteen-count indictment against the defendants in this case. In Count I, defendants Peter J. Serubo, W. Thomas Plachter, Jr., and Donald H. Brown are charged with conspiracy to evade the corporate taxes of the Plachter-Serubo Cadillac Company (Company) for the years 1971-73. Counts II, III and IV charge Serubo with evasion of personal income taxes for the years 1971-73 and Counts V, VI and VII charge Plachter with evasion of personal income taxes for the same period. Evasion of the Company's corporate taxes for the years 1971-73 is charged against Plachter, as President of the Company, and Serubo, as Secretary of the Company, in Counts VIII, IX and X. Brown, as Controller of the Company, is charged in the remaining three counts with aiding and abetting Plachter and Serubo's evasion of corporate income taxes for the same period.
Although they join in each other's motions, all defendants individually have moved for severance and have proposed different ways to sever the indictment. Brown requests that the case be divided in two; he seeks to sever the conspiracy count (Count I) and the aiding and abetting counts (Counts XI, XII, XIII) from those remaining. Plachter contends that the Court is required to sever the counts charging him with personal income tax evasion (Counts V, VI, VII) from those charging Serubo with similar offenses (Counts II, III, IV) and to try these counts separately from those involving the Company's taxes (Counts, I, VIII, IX, X, XI, XII, XIII). While agreeing that the personal income tax evasion counts should be severed from the remaining counts and severed between the two defendants, Serubo seeks to further sever the counts involving the Company so that those charging Brown with aiding and abetting (Counts XI, XII, XIII) are severed from the remaining conspiracy (Count I) and corporate tax (Counts VIII, IX, X) counts. The defendants' motions are made under Rules 8 and 14 of the Federal Rules of Criminal Procedure. After having considered the facts and law relevant to the motions, the Court concludes that they must be denied at this point.
Rule 8 defines the scope of permissible joinder of offenses and defendants. It provides:
(a) Joinder of Offenses. Two or more offenses may be charged in the same indictment or information in a separate count for each offense if the offenses charged, whether felonies or misdemeanors or both, are of the same or similar character or are based on the same act or transaction or on two or more acts or transactions connected together or constituting parts of a common scheme or plan.
(b) Joinder of Defendants. Two or more defendants may be charged in the same indictment or information 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. Such defendants may be charged in one or more counts together or separately and all of the defendants need not be charged in each count.
If offenses or defendants are misjoined under Rule 8, the trial court has no discretion; it must grant severance. United States v. Hilliard, 436 F. Supp. 66 (S.D.N.Y.1977).
In this case, defendants raise two Rule 8 challenges to the indictment. First, they claim that the joinder of the personal income tax evasion counts with those involving the Company is improper because the indictment does not allege the necessary factual connection between counts. Secondly and similarly, they argue that the counts charging Serubo with personal income tax evasion have been misjoined with those counts charging Plachter with similar offenses as the government has not alleged "participation in the same act or transaction or in the same series of acts or transactions constituting an offense or offenses."
Nevertheless, the Court finds that, although it is much better practice to state the "connecting" allegations required by Rule 8 in the indictment, the absence of these allegations from the indictment is not dispositive of a Rule 8 motion. Government representations made in other pretrial proceedings and documents as to the factual connections between the counts may satisfy the requirements of Rule 8. United States v. Franks, 511 F.2d 25 (6th Cir.), Cert. denied, 422 U.S. 1042, 95 S. Ct. 2654, 45 L. Ed. 2d 693 (1975); King v. United States, 355 F.2d 700 (1st Cir. 1966); United States v. Florio, 315 F. Supp. 795 (E.D.N.Y.1970); United States v. Borish, 452 F. Supp. 518 (E.D.Pa.1978). As generally recognized, Rule 8 balances court convenience and prejudice against defendants by joinder of offenses and defendants. 8 Moore's Federal Practice P 8.02. It is "intended to proscribe joinder only where the presumptive benefits from joinder are clearly outweighed by the potential prejudice to the defendants." United States v. Florio, supra, 315 F. Supp. at 797. Therefore, a technical reading of Rule 8 which requires the factual connection to be outlined in the indictment is not mandated by the policies of Rule 8. If the necessary connection between counts is present, whether or not it is stated in the indictment, then presumably the prejudice that Rule 8 seeks to protect defendants from is absent and trial convenience considerations require that severance be denied.
In this case, the Government has alleged in its responses to defendants' pretrial motions the connection it plans to establish between the personal income tax counts and the counts involving the Company's taxes and the connection between those counts that charge Serubo with personal income tax evasion and those that charge Plachter with the same offenses. The apparent theory of the government's case is that defendants conspired to and did evade payment of the Company's taxes by deducting as business expenses the personal expenses of defendants Serubo and Plachter who, in turn, did not report the Company's payment of these expenses as personal income. In its response to the severance motions, the Government states:
"The alleged evasion of the corporate income taxes by Serubo and Plachter is directly linked to the evasion of the personal income taxes by the same individuals. Serubo and Plachter received a double benefit from the corporate payment for their personal goods and services. They directly benefited in that they did not have to use any personal monies for payment of the goods and services; they indirectly benefited in that corporate payments for the goods and services were deducted on the corporate tax returns, thereby reducing the tax liability of the Cadillac Company of which Serubo and Plachter were 91% Stockholders. The connection between the corporate tax and personal tax evasion is the corporate activity of the defendants, particularly the disbursement of the corporate checks representing payment to vendors for goods and services received by the defendant Serubo or Plachter. These check payments were entered in the corporate books either in business expense accounts in the case of the purchase of an item such as Serubo's piano, or the asset accounts in the case of the purchase of an item such as Plachter's home security system. At the time of the computation of the corporate tax liability, these "business expenses' along with the depreciation on the asset items, were subtracted from the corporation's gross income, thereby reducing the amount of corporate taxable income and corporate tax liability. The Government contends that the corporate check payments were never business deductions but actually represented dividends to defendants Serubo and Plachter and therefore not deductible by the corporation from its corporate gross income. Conversely, as constructive dividends, they should have been reported by Serubo or Plachter but allegedly were not . . . . The Government will prove a chain of events beginning with a defendant's receipt of a particular good or service, its payment by the corporation through a corporate check, and the entry of the corporate check in the books and records of the company. These sequential events coalesce the proof of the personal and corporate tax charges."
The government further alleges in the same responsive brief that Brown, as controller of the corporation, was responsible for hiding the personal expenses in the corporate books.
The Court finds that the connection alleged between the various counts is sufficient under Rule 8. This is an indictment involving various defendants and therefore, both the joinder of offenses and defendants must be tested under Rule 8(b). United States v. Somers, 496 F.2d 723 (3d Cir.), Cert. denied, 419 U.S. 832, 95 S. Ct. 56, 42 L. Ed. 2d 58 (1974). The issue, then, is whether the government alleges that the defendants "participated in the same act or transaction or in the same series of acts or transactions constituting an offense." To satisfy Rule 8(b)"s requirements, "it must only be shown that each act or transaction was part of a "series of acts or transactions' and that each defendant participated in the series of transaction," United States v. Laca, 499 F.2d 922 (5th Cir. 1974); joinder does not require the participation by all defendants in every act constituting each joined offense. United States v. Roselli, 432 F.2d 879 (9th Cir. 1970), Cert. denied, 401 U.S. 924, 91 S. Ct. 883, 27 L. Ed. 2d 828 (1971). Clearly, the government claims that the alleged evasion of personal income tax by Serubo and Plachter was part of a series of transactions that involved and flowed from the evasion of the Company's taxes and that all defendants participated in this series. This case is similar to and consistent with other cases where the government has joined in a multi-defendant indictment counts charging personal income tax offenses with those that allege offenses arising from the manner in which the unreported income was obtained. See, e.g., United States v. Roselli, supra; United States v. Beasley, 519 F.2d 233 (5th Cir. 1975), Vacated on other grounds, 425 U.S. 956, 96 S. Ct. 1736, 48 L. Ed. 2d 201 (1976); United States v. Isaacs, 493 F.2d 1124 (7th Cir.), Cert. denied, 417 U.S. 976, 94 S. Ct. 3183, 41 L. Ed. 2d 1146 (1974). As Rule 8(b) does not require that each defendant be named in every count and as the offenses charged are apparently factually related, United States v. Gimelstob, 475 F.2d 157 (3d Cir. 1973), the motions to sever under Rule 8(b) must be denied.
Defendants' motions to sever under Rule 14 are addressed to the discretion of the Court and turn upon a showing of prejudice.
Rule 14. Relief from Prejudicial Joinder. If it appears that a defendant or the government is prejudiced by a joinder of offenses or of defendants in an indictment or information or by such joinder for trial together, the court may order an election of separate trial of counts, grant a severance of defendants or provide whatever other relief justice requires. . . .
At this time, the Court finds insufficient basis upon which to grant defendants' motions.
Although defendants claim that the joint trial of this thirteen-count indictment may prejudice them as evidence may be admitted to prove one count which would be inadmissible to prove another, this is not an adequate reason to sever the indictment. United States v. Kenny, 462 F.2d 1205 (3d Cir. 1972). Nor should, as defendants contend, an indictment be severed because the case appears complex. The improper question is whether the jury can "reasonably be expected to compartmentalize the evidence as it relates to the separate defendants in view of its volume and limited admissibility." United States v. Borish, supra. In this case, even though the evidence promises to be extensive, the Court expects it to be presented in a cogent fashion and will advise the jury through its instructions as to the manner in which the evidence can be used; therefore, the Court believes that the jury will be able to compartmentalize the evidence and consider it for its proper purposes. United States v. Dansker, 537 F.2d 40 (3d Cir. 1976), Cert. denied, 429 U.S. 1038, 97 S. Ct. 732, 50 L. Ed. 2d 748 (1977). And while Plachter and Brown may be correct in their claims that more damaging evidence will be presented against Serubo than against them, it is the law in this circuit that a "defendant is not entitled to a severance merely because evidence against a co-defendant is more damaging than the evidence against the moving party." United States v. Somers, supra, 496 F.2d at 730. The possibility of "guilt by association" does not generally afford a ground for severance. United ...