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United States v. Jalloh

United States District Court, C.D. California, Southern Division

April 20, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
SOLOMON JALLOH, aka “Suliman Jalloh, ” Defendant.

          ORDER DENYING DEFENDANT'S MOTION FOR SEVERANCE

          HONORABLE CORMAC . CARNEY United States District Judge.

         I. INTRODUCTION

         Defendant Solomon Jalloh is charged with eight counts of wire fraud in violation of 18 U.S.C. § 1343 and one sentencing enhancement pursuant to 18 U.S.C. § 3147(1). (See generally Dkt. 36 [First Superseding Indictment, hereinafter “FSI”].) These charges all arise out of an alleged fraudulent scheme to offer and sell investments through Defendant's entities, Zion Capital Ventures and Zion Capital Investments (together, “Zion”). (See generally id.) Before the Court is Defendant's motion to sever the case into two distinct trials: one concerning the eight counts of wire fraud and the other concerning the Section 3147 sentencing enhancement. (Dkt. 53 [Motion, hereinafter “Mot.”].) Defendant further seeks to prevent the government from introducing or seeking the admission of any evidence that relates to the first trial at the second trial, and vice versa. (Id.) For the following reasons, the motion is DENIED.

         II. PROCEDURAL HISTORY AND FACTUAL BACKGROUND

         On October 21, 2015, Defendant was charged with seven counts of wire fraud in connection with an alleged fraudulent investment scheme pursuant to 18 U.S.C. § 1343 (wire fraud) and 18 U.S.C. § 2 (aiding and abetting). (Dkt. 1.) Defendant entered a plea of not guilty on November 15, 2015, and was released on a $15, 000 unsecured bond. On August 22, 2016, United States Pretrial Services (“PSA”) filed a letter with the Court, requesting that the Court set a hearing to determine whether Defendant's bond should be revoked in light of an apparent violation of Defendant's conditions of release-namely, that he was continuing to engage in the solicitation of funds without PSA approval. (Dkt. 19.) The FBI had discovered that a prospective investor had arranged for a $15, 000 wire transfer to be sent to Defendant's account after Defendant promised the investor he would double the $15, 000 in two weeks through an automated trading platform. (Dkt. 21-1 at 1.) Defendant apparently had not informed the investor that he was under federal indictment for wire fraud and did not deliver the return on the investment that he promised to the investor. (Id. at 1-2.) While on pretrial release, Defendant also continued to hold himself out as a licensed trader to persuade potential investors to open brokerage and mutual fund accounts with him. (Dkt. 21-2.) Believing Defendant had violated the conditions of his pretrial release, the government filed a motion to revoke Defendant's bond, (Dkt. 21), and after a hearing on September 26, 2016, the Court granted the motion, (Dkt. 27). On February 8, 2017, the grand jury returned the FSI, adding an additional count of wire fraud and a sentencing enhancement based on the bond violations. (FSI.)

         According to the FSI, beginning in or around May 2012, Defendant knowingly and with intent to defraud devised, participated in, and executed a scheme to defraud investors and to obtain money from investors by means of materially false and fraudulent pretenses, representations, and promises and the concealment of material facts. (Id. ¶ 3.) Defendant allegedly used false and fraudulent statements and written materials to induce individuals to invest in a purported “investment fund/trading program” managed by Defendant through Zion. (Id. ¶ 4(a).)

         To attract investors, Defendant allegedly told them that his program offered a monthly return of ten percent, Zion had made monthly returns of thirty-five percent since 2008, Zion investments were profitable (based on false account statements sent to investors), Zion had millions of dollars in a Citibank account and a Citibank banker with the phone number 800-758-9089 could verify such amounts, Zion had over $800 million under management, and Zion was partnered or affiliated with Zions Bancorporation (a NASDAQ-traded bank holding corporation headquartered in Utah). (Id. ¶ 5.) However, Defendant concealed that he would use investors' principal to pay other investors, brokers, and employees, and for his own personal use, Zion had not made monthly returns of thirty-five percent since 2008, the account statements sent to investors were false, Zion did not have over $800 million under management, Zion did not have millions of dollars in a Citibank account, and the purported Citibank banker telephone number actually belonged to Defendant. (Id. ¶ 6.)

         The FSI further alleges that Defendant, together with others unknown to the grand jury, transmitted or caused to be transmitted (or aided and abetted in the transmission thereof) seven e-mails and telephone calls on November 13, 2013, and one e-mail on July 5, 2016, by means of wire and radio communication in interstate and foreign commerce for the purpose of executing the scheme to defraud, constituting eight counts of wire fraud. (Id. ¶ 8.) Finally, the FSI alleges that Defendant is subject to an enhanced penalty under 18 U.S.C. § 3147(1) because he committed the eighth count of wire fraud while on pretrial release. (Id. at 6.)

         Defendant now asks that the Court sever this case into two distinct trials, one concerning the eight counts of wire fraud and one concerning the Section 3147 sentencing enhancement, on the grounds of misjoinder. (Mot.) Defendant also argues that in each of these severed trials, the Court should preclude the government from introducing or seeking the admission of any statement, testimony, or other evidence that relates or pertains to the other trial, particularly to prevent the jurors from learning that Defendant is standing trial on an “in custody” basis, on the grounds that the prejudicial nature of such evidence far outweighs its probative value. (Id.)

         III. LEGAL STANDARD

         Federal Rule of Criminal Procedure 8(a) provides that the “indictment or information may charge a defendant in separate counts with 2 or more offenses 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 are connected with or constitute parts of a common scheme or plan.” The word “transaction” is “interpreted flexibly” and “may comprehend a series of related occurrences.” United States v. Terry, 911 F.2d 272, 276 (9th Cir. 1990) (quoting United States v. Kinslow, 860 F.2d 963, 966 (9th Cir. 1988). “Because Rule 8 is concerned with the propriety of joining offenses in the indictment, the validity of the joinder is determined solely by the allegations in the indictment.” Id.

         Federal Rule of Criminal Procedure 14(a), in turn, provides that “[i]f the joinder of offenses or defendants in an indictment, an information, or a consolidation for trial appears to prejudice a defendant or the government, the court may order separate trials of counts, sever the defendants' trials, or provide any other relief that justice requires.” The prejudice “must have been of such magnitude that the defendant's right to a fair trial was abridged.” United States v. Lewis, 787 F.2d 1318, 1321 (9th Cir.), opinion amended on denial of reh'g, 798 F.2d 1250 (9th Cir. 1986). Joinder is “the rule rather than the exception.” United States v. Whitworth, 856 F.2d 1268, 1277 (9th Cir. 1988) (quoting United States v. Armstrong, 621 F.2d 951, 954 (9th Cir. 1980)).

         IV. DISCUSSION

         Defendant's position is that the first seven counts of wire fraud alleged in the FSI constitute one fraudulent scheme, and the eighth count of wire fraud that he allegedly committed while on pretrial release constitutes a separate and distinct fraudulent scheme. (Mot. at 5.) He argues that the Court should try the eight counts of wire fraud separately from the sentencing enhancement, because “allowing the Government to allege and introduce evidence to the jury at trial that the Defendant committed the two separate and distinct alleged fraudulent schemes (i.e., one prior to the Defendant's release on bond, and one after he was released on bond), along with the allegation that he committed a violation of law while he was on release on bail is so prejudicial to the Defendant that the Defendant's right to a fair trial would be denied.” (Id. at 4-5.) He believes that the jury will ‚Äúsurely conclude that the Defendant is in custody and that information alone, or in combination with the time lapse between Count 1-7 and Count 8, will undoubtedly cause the jury to factor that information into its deliberations in a manner that is ...


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