The government claims Mr. Di Girolamo violated Section 17045 by making secret payments to Warner. Section 17045 prohibits "the secret payment . . . to the injury of a competitor and where such payment tends to destroy competition."
The Court finds that Di Girolamo's alleged payment of bribes to Warner falls within the scope of the Unfair Practices Act. It was the secret payment of bribes which destroyed all competition in the letting of painting contracts for First Nationwide Savings.
C. WERE THE LAWFUL KICKBACKS DEDUCTIBLE AS A COST OF GOODS SOLD
The last question posed by this case, i.e. whether the bribes are deductible, is obviated by the Court's conclusion that the bribes are unlawful under California law. Bribes or kickbacks are not lawfully deductible when unlawful under the laws of the State of California. Accordingly, the motion to dismiss Counts One and Two of the Superseding Indictment is DENIED.
III. OTHER MOTIONS
Defendants have made two motions which remain before the Court. Pursuant to Fed. R. Crim. P. 14, defendants move either to sever for trial Counts One and Two from Counts Three and Four, or alternatively for the prosecutor to elect between Counts One and Two and Counts Three and Four. Additionally, pursuant to Fed. R. Evid. 403, defendants move to exclude all evidence of the kickback scheme from trial. The gravamen of both motions is that evidence of the kickback payments would prejudice the trial on Counts Three and Four.
The government opposes both motions on the grounds that while evidence of the kickback scheme is needed to prove Counts One and Two, judicial economy requires a single trial on all counts.
A. RULE 14 MOTION
If the substantial rights of the accused will be prejudiced by submission to the same jury of more than one distinct felony charge among two or more counts of the same class, the court can compel the prosecutor to elect which counts to try, Pointer v. United States, 151 U.S. 396, 38 L. Ed. 208, 14 S. Ct. 410 (1894), or may order a separate trial of individuals or offenses. United States v. Wilson, 140 U.S. App. D.C. 220, 434 F.2d 494 (D.C. Cir. 1970). See, generally, Fed. R. Crim. P. 14.
Analysis under Rule 14 begins upon a showing of prejudice. See, e.g. United States v. Escalante, 637 F.2d 1197, 1201 (9th Cir.), cert. denied, 449 U.S. 856, 66 L. Ed. 2d 71, 101 S. Ct. 154 (1980), citing United States v. Martinez, 486 F.2d 15, 22 (5th Cir. 1973), and United States v. Echeles, 352 F.2d 892, 896 (7th Cir. 1965) (to prevail in a motion for severance under Rule 14, the defendant must show prejudice of such magnitude that the defendant would be denied a fair trial.) Defendants speculate that, because a jury will find the issue of bribery immoral, they will be unable to follow the Court's instructions and to separate the evidence with respect to each count.
The Di Girolamos fail to show how they will be prejudiced by a joint trial, or that the potential for prejudice can not be cured with a jury instruction. A premise underlying all jury trials is that jurors can and do follow their instructions. See Francis v. Franklin, 471 U.S. 307, 325, 85 L. Ed. 2d 344, 105 S. Ct. 1965 n.9 (1985).
The Court finds that instructions to the jury to view the evidence separately as to each count in which a defendant is charged, and to view the evidence separately as to each defendant charged, is sufficient to safeguard the Di Girolamos from any potential evidentiary spillover. See, e.g. United States v. Silvestri, 790 F.2d 186 (1st Cir.), cert. denied 479 U.S. 857, 93 L. Ed. 2d 129, 107 S. Ct. 197 (1986).
As defendants have not shown prejudice, the motion is DENIED WITHOUT PREJUDICE. Defendants may again move for a separate trial on Counts One and Two, pursuant to Fed. R. Crim. P. 14. The Court will consider the motion if defendants can demonstrate actual prejudice will result, from admitting evidence of the kickback payments, at a joint trial with respect to defendants and to counts.
B. MOTION TO SUPPRESS
Mr. Di Girolamo argues that the jury will find the kickbacks immoral. Moreover, the Di Girolamos argue that since 1984, several major scandals involving financial wrongdoing resulted in a strong public reaction against financial wrongdoing. The Di Girolamos failed to submit either evidence or argument to suggest what scandals they are referring to or how these scandals might change the atmosphere in which they may be tried.
Under Fed. R. Evid. 403, this Court has wide discretion to determine whether the prejudicial effect of evidence so far outweighs its probative value that the evidence should be excluded. See, e.g., United States v. Martin, 599 F.2d 880 (9th Cir.), cert. denied, 441 U.S. 962, 60 L. Ed. 2d 1067, 99 S. Ct. 2407 (1979). Exercising this discretion requires the Court to weigh the probative value against the prejudicial impact. Neither the government, nor the defendants, have addressed either the probative value or the prejudicial impact of admitting evidence of the bribes.
As defendants have not shown prejudice, the motion is DENIED WITHOUT PREJUDICE.
1. Defendants' Motion to Dismiss Counts One and Two of the Superseding Indictment is DENIED;
2. Defendants' Motion to Sever or for Election of Counts is DENIED WITHOUT PREJUDICE;
3. Defendants' Motion to Exclude Evidence is DENIED WITHOUT PREJUDICE.
IT IS SO ORDERED.
DATED: December 3, 1992
HONORABLE JAMES WARE
United States District Judge