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United States v. Smith

United States District Court, N.D. Texas, Dallas Division

June 24, 2019

UNITED STATES OF AMERICA,
v.
TERENCE CARLYLE SMITH (01), NANCY B. PARKER (02), and MICHAEL JAMES SIMS (03), Defendants.

          MEMORANDUM OPINION & ORDER

          JANE J. BOYLE UNITED STATES DISTRICT JUDGE

         Before the Court are: (1) Defendants Terence Carlyle Smith and Nancy B. Parker's Joint Motion to Sever under Federal Rule of Criminal Procedure 8(b) (Doc. 61); and (2) Defendant Nancy B. Parker's Motion to Sever under Federal Rule of Criminal Procedure 14 (Doc. 62). The Government has filed an Omnibus Response opposing both Motions (Doc. 68) and Smith and Parker have filed a Joint Reply in support of their Joint Motion to Sever (Doc. 72). For the reasons stated below, the Court DENIES both Motions (Docs. 61 & 62).

         I.

         BACKGROUND

         On August 30, 2017, the Government filed a Twenty-Five-Count Indictment against three named Defendants for their alleged involvement in defrauding their employer, the Federal Home Loan Bank of Dallas (FHLB-D). See Doc. 1, Indictment. Defendants are Terrence Carlyle Smith, former president and chief executive officer of FHLB-D; Nancy B. Parker, former chief information officer of FHLB-D; and Michael James Sims, former chief financial officer of FHLB-D. Id. ¶¶ 8-10. The various charges in the Indictment can be divided into two categories: (1) Counts One through Twenty-One involve allegations that Defendants submitted false travel and expense reports and cash out requests to FHLB-D to obtain reimbursements for travel-related costs and for unused vacation time that served no legitimate business purpose (collectively the “Travel Counts”), id. ¶¶ 11-24; and (2) Counts Twenty-Two through Twenty-Five involve Parker directing one or more individuals to purchase gifts for Smith that served no business purpose and then to submit false documents to FHLB-D for reimbursement for the cost of these gifts (collectively the “Gift Counts”), id. ¶¶ 25-35.

         More specifically, Count One of the Travel Counts charges all three Defendants with Conspiracy to Make False Statements to a Federal Home Loan Bank, 18 U.S.C. §§ 371, 1006, and alleges over forty overt acts occurring from 2008 to 2013 in furtherance of the conspiracy. Id. ¶¶ 11-22. These overt acts consisted of each Defendant submitting various false travel and expense reports as well as cash out requests for unused vacation hours. Id. ¶¶ 21-22. Counts Two through Twenty-One of the Travel Counts charge each respective Defendant with making False Statements to a Federal Home Loan Bank and Aiding and Abetting False Statements to a Federal Home Loan Bank, 18 U.S.C. §§ 1006 and 2, through their false submission of these travel reports. Id. ¶¶ 23-24.

         Count Twenty-Two of the Gift Counts charges Parker with Conspiracy to Commit Federal Home Loan Bank Theft, Embezzlement, and Misapplication, 18 U.S.C. § 657, and alleges that from 2005 to 2012 she directed other individuals to purchase gifts for Smith and to then make false statements to FHLB-D to obtain reimbursement for those purchased items. Id. ¶¶ 25-33. Counts Twenty-Three through Twenty-Five of the Gift Counts charge Parker with specific substantive counts for Federal Home Loan Bank Theft, Embezzlement, and Misapplication, and Aiding and Abetting Federal Home Loan Bank Theft, Embezzlement, and Misapplication, 18 U.S.C. §§ 657 and 2. Id. ¶¶ 34-35. Smith and Sims are not charged with any of the Gift Counts.

         On May 20, 2019, Smith and Parker filed a Joint Motion to Sever under Federal Rule of Criminal Procedure 8(b) arguing inter alia that the Indictment fails to plead a “substantial identity of facts or participants” or an alleged “singular conspiratorial objective” between the Travel and Gift Counts to satisfy joinder. Doc. 61, Joint Mot. to Sever, 1-2. Then, on May 21, 2019, Parker filed her own separate Motion to Sever under Federal Rule of Criminal Procedure 14 arguing that even if joinder is proper under Rule 8(b), the Travel and Gift Counts should be severed because a joint trial would cause her substantial prejudice. Doc. 62, Parker's Mot. to Sever, 1. The Government has filed an Omnibus Response opposing both Motions (Doc. 68), and after being granted leave, Smith and Parker have filed a Reply in support of their Joint Motion to Sever (Doc. 72). Having been fully briefed, the Court addresses whether severance is proper under the applicable legal standards.

         II.

         ANALYSIS

         A. Joint Motion to Sever Under Rule 8(b)

         Smith and Parker first move for severance of the Travel and Gift Counts under Federal Rule of Criminal Procedure 8(b) arguing that the Indictment fails to plead a “substantial identity of facts or participants” or an alleged “singular conspiratorial objective” between the Travel and Gift Counts to satisfy joinder. Doc. 61, Joint Mot. to Sever, 1-2.

         In cases involving “multiple defendants as well as multiple counts, Rule 8(b) . . . provides the relevant standard.” United States v. Kaufman, 858 F.2d 994, 1003 (5th Cir. 1988) (citation omitted). Rule 8(b) provides that two or more defendants may be charged in a single indictment “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.” Fed. R. Crim. P. 8(b). “All defendants need not be charged in each count.” Id. “As the plain language of Rule 8(b) provides, there is no requirement ‘that each defendant have participated in the same act or acts.'” United States v. McRae, 702 F.3d 806, 820 (5th Cir. 2012) (quoting United States v. Krenning, 93 F.3d 1257, 1266 (5th Cir. 1996)).

         “Proper joinder requires that the offenses charged ‘must be shown to be part of a single plan or scheme,' and that ‘[p]roof of a common scheme is typically supplied by an overarching conspiracy from which stems each of the substantive counts.'” United States v. USPlabs, LLC, 2018 WL 5831478, at *3 (N.D. Tex. Nov. 7, 2018) (quoting United States v. Lane, 735 F.2d 799, 805 (5th Cir. 1984), rev'd on other grounds, 474 U.S. 438 (1986)). “The Government, however, is not required to allege a conspiracy in order to join defendants or counts.” Id. (citing McRae, 702 F.3d at 821 (citing United States v. Dennis, 645 F.2d 517, 520 (5th Cir. Unit B Aug. 1981), overruled on other grounds, United States v. Lane, 476 U.S. 438 (1986))) (“Although multi-defendant and multi-offense indictments often charge a conspiracy among some or all defendants, we have repeatedly rejected the contention that proper joinder of multiple defendants and multiple offenses requires a conspiracy charge.”).

         Rule 8(b) does not require that each defendant have actively participated in each phase of the conspiracy; however, “‘[a] single conspiracy can be found when the indictment adequately shows a singular conspiratorial objective.'” United States v. Moser, 123 F.3d 813, 827 (5th Cir. 1997) (quoting United States v. Lindell, 881 F.2d 1313, 1318 (5th Cir. 1989)). In determining whether one overarching conspiracy exists, courts consider “(1) the time frame; (2) the locations of the events charged as part of the conspiracy; (3) the persons acting as co-conspirators; (4) the statutory offenses charged in the indictment; and (5) the overt acts or other description of the offense charged that indicate the nature and scope of the activity that the government seeks to punish in the case.” Potashnik, 2008 WL 5272807 at *17 (citing United States v. Ellender, 947 F.2d 748, 759 (5th Cir.1991)).

         “Whether the counts of an indictment fulfill the ‘same series' requirement is determined by examining the relatedness of the facts underlying each offense.” United States v. Harrelson, 754 F.2d 1153, 1176 (5th Cir. 1985) (internal quotation marks omitted); see also USPlabs LLC, 2018 WL 5831475, at *3 (“Whether joinder is proper is determined from the allegations in the indictment, which, absent any suggestion of prosecutorial misconduct, are accepted as true.”). “What is required is a series of acts unified by some ‘substantial identity of facts or participants.'” Dennis, 645 F.2d at 520 (quoting United States v. Nettles, 570 F.2d 547, 551 (5th Cir. 1978)). Lastly, the “Supreme Court has instructed federal courts to interpret the requirements of joinder under Rule 8 liberally” in favor of joint trials of defendants who are indicted together. Potashnik, 2008 WL 5272807 at *4 (citing Zafiro v. United States, 506 U.S. 534, 537 (1993)); see also United States v. Bullock, 71 F.3d 171, 174 (5th Cir. 1995) (“Joinder of charges is the rule rather than the exception[, ] and Rule 8 is construed liberally in favor of initial joinder.”). With these Rule 8(b) principles in mind, the Court now determines whether joinder of the Travel and Gift Counts is appropriate.

         Smith and Parker argue that the Indictment improperly joins the Travel and Gift Counts because they involve separate conspiracies, different participants, and different overt acts. Doc. 61, Joint Mot. to Sever, 3. Specifically, they argue that the Travel Counts involve Smith, Parker, and Sims taking over 30 trips in a five-year period (2008-2013), which they requested reimbursement for by submitting travel and expense reports for the stated reason of work trips, but which served no legitimate business purpose. Id. Because these trips are alleged to have had no legitimate business purpose, the Indictment also ...


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