The opinion of the court was delivered by: DEBEVOISE
DEBEVOISE, Senior District Judge
There are presently pending a motion of defendant Raul Corona for an order (1) dismissing the indictment, (2) directing that a Kastigar hearing be conducted and (3) excluding certain documents from evidence based on the attorney-client privilege, and a motion of defendant Leonard Pelullo for an order dismissing the indictment for the reason that the government seized and made use of documents protected by the attorney-client privilege or for alternative relief.
For the reasons set forth below, Corona's motion to dismiss the indictment against him will be granted; Pelullo's motion to dismiss the indictment against him and for alternative relief will be denied.
In June 1994, a federal grand jury sitting in Newark returned a 53-count indictment charging Corona with various violations of federal law, namely, conspiracy, employee benefit pension plan embezzlement and money laundering. In December 1994, the same grand jury returned the subject 54-count superseding indictment against Corona and Pelullo. Essentially, that indictment charges that between May 1989 and March 1991 Corona and Pelullo conspired with David Hellhake and others to embezzle $ 4.176 million from two employee pension benefit plans at Compton Press, Inc. ("Compton") by lending $ 1.15 million to Granada Investment, Inc. ("Granada") and $ 1.326 million to Away to Travel South, Inc. ("ATTS") and by converting $ 1.7 million held in an annuity contract with Union Mutual Life Insurance, Co. ("UNUM").
In the Fall of 1991, the United States Attorney's Office for the Middle District of Florida, the United States Attorney's Office for the District of New Jersey, and the Florida Office of Statewide Prosecutions were conducting investigations focusing on Pelullo and various companies operated or controlled by him.
By subpoena dated August 16, 1991, Corona was subpoenaed to appear before a federal grand jury sitting in Jacksonville, Florida. The subpoena commanded Corona's appearance before a grand jury in the Middle District of Florida on September 26, 1991.
Corona did not have an attorney at that time. He was given a letter of immunity by the United States Attorney's Office for the Middle District of Florida. This letter advised Corona that he was subpoenaed in connection with "an investigation concerning allegations of bankruptcy fraud and related offenses by Leonard Pelullo and others." The letter went on to state that:
This letter will confirm that your status before the Grand Jury is that of a witness, and that no statement, testimony or other information or any information directly or indirectly derived from such statement, testimony or information, made by you while testifying or during interviews by investigative agents or the United States Attorney's Office, may be used against you in any criminal case, except in a prosecution for perjury or giving a false statement. The "use of immunity" just explained is contingent upon you providing complete and truthful information and testimony at all times. (Emphasis added).
This letter did not limit the agreement to the matters being investigated by the United States Attorney for the Middle District of Florida and contained no similar "reservation" clauses.
After receiving the "use immunity," Corona was debriefed by AUSA O'Malley as well as by FBI Special Agent Wood. Corona then appeared before the federal grand jury where he answered additional questions. During that testimony, Corona was again assured of the protection of the letter "which essentially gives you use immunity for your testimony here today." Corona then testified as to Pelullo's actions in controlling companies and intermingling monies including monies of Compton Press.
The exchanges between AUSA O'Malley and Corona before the grand jury make it clear that the Middle District of Florida investigation was directed primarily to the bankruptcy fraud which occurred in Florida. However: (i) both Corona and AUSA O'Malley were fully aware of the parallel investigation which was taking place in Newark; (ii) as the evidentiary hearing held in the New Jersey case demonstrates, there is a significant interrelationship between the Newark and Florida charges in that many of the same persons and corporate entities were involved in each and the same modus operandi is alleged in each; and (iii) the grand jury exchanges do nothing to narrow the general immunity conferred in the immunity letter; rather, in their totality, they confirm the breadth of the immunity conferred:
Q: You don't have an attorney here today; do you?
Q. Okay. And you've got the immunity letter, so you understand that what you're telling us isn't going to be used against you here; correct?
A. Right. I do not have an attorney here. I feel comfortable enough with working with you, with the immunity letter -- I don't think I really did anything wrong in this case. I really wanted to encase the relationship -- or to be more comfortable to talk with you about the Newark thing that concerned me. Although I really don't think I did anything wrong; it's what they did after what I did that kind of made me worried.
MS. O'MALLEY: For the Grand Jury's purpose, that's a separate investigation and a separate jurisdiction.
THE WITNESS: Separate investigation, nothing to do with this.
Q. Now, you understand that this Grand Jury is looking at the alleged bankruptcy fraud on PIE primarily; correct?
A. Right. I imagine it's how he funneled money through One Plaza out of there, used his management agreement just to pay his expenses that One Plaza was using to pay -- to manage all of his entities, probably.
MS. O'MALLEY: Okay, Do any of the Grand Jurors have any questions for Mr. Corona?
A. JUROR: You seem to have a great wealth of knowledge about Mr. Pelullo. Do you have anything -- she -- the District Attorney has mentioned what this Grand Jury is looking at. Other than what you've already explained, do you have any other dirt or any dust you'd like to let us look at?
THE WITNESS: On Mr. Pelullo, unrelated to what this investigation is?
A. JUROR: Well, primarily related to this investigation.
Q. Yes. Let me caution you, we're looking at the Jacksonville venue bankruptcy fraud. Are you aware of any other criminal violations he may have committed in the Middle District of Florida?
Grand Jury Testimony of Raul Corona, dated October 17, 1991, at p. 39, 1.22-25; p. 4033, 1.1-14. (A103).
The government's case against both Pelullo and Corona will be based in good measure upon the thousands of documents which trace the funds allegedly embezzled from the two Compton Press, Inc. employee benefit plans. At the government's request, a hearing pursuant to Rule 104 of the Federal Rules of Evidence was held in order to determine the authenticity of the records and the admissibility of summary charts which, based upon the records, trace the flow of the funds.
During the New Jersey investigation, subpoenas were served on various banks, brokerage houses, law firms and other persons and entities, and pursuant to those subpoenas a vast number of documents was produced. In addition, documents were obtained from the United States Attorney's Office in the Middle District of Florida. These documents had been seized during the course of a search of a warehouse containing many thousands of documents placed there by Pelullo.
At the hearing, the various custodians of the subpoenaed documents identified them and testified about the manner in which they were made and maintained. In addition, Rosario Ruffino testified. He was the Special Agent of the United States Department of Labor, Office of Labor Racketeering, who had primary responsibility for investigating and preparing this case. In his testimony and in a supplemental affidavit he described how the documents had been obtained and how the summary charts had been prepared.
Ultimately, I rejected defendants' objections to the documents and ruled that all of them had been properly authenticated and were admissible. I also held that the information in the summary charts was based upon the documents and that the charts were admissible. I reserved to defendants the right to compare copies of the documents with the originals and to file objections to any individual document which appeared subject to challenge and to move to redact any information on any summary chart which appeared to be based on something other than an authenticated document. Further, my ruling was subject to any decision arising out of Corona's Kastigar motions and Pelullo's privilege motion.
It is Corona's contention that the government has violated its commitment that none of the information derived from him would be used against him in any criminal case.
On October 17, 1991, Corona testified before a grand jury in the Middle District. He also met with and provided information to AUSA Kathleen O'Malley and agents of the FBI, in particular, Special Agent Martin Wood.
In his grand jury testimony, Corona named many of the various Pelullo companies for which he worked; he described how Pelullo moved money back and forth between companies; he testified that money was taken out of PIE at Pelullo's direction and funnelled into other companies where it was used for the personal benefit of Pelullo and the Silver Sands Company (which made payments for Pelullo's personal benefit); he identified Pelullo companies and associates, some of which or whom are a part of the present case.
On October 22, 1991, Special Agent Wood executed an affidavit in support of a warrant authorizing the search of a 2400-square foot warehouse located at 6985 N.W. 82nd Avenue, Miami, Florida. The warehouse contained the records of 25 Pelullo companies, including Compton Press, Inc. and other companies which figure prominently in the embezzlements which are the subject of the present case.
The information which Corona provided was used extensively to support the application for the search warrant. The affidavit was prepared within five days after Corona testified before the grand jury and was debriefed by Special Agent Wood under his immunity. Throughout the affidavit Special Agent Wood states that the information set forth was derived from Corona as well as other persons.
While the United States Attorney in the Middle District of Florida was investigating the Ryder/PIE embezzlements, the United States Attorney's Office in Newark was investigating the Compton Press pension fund embezzlements. On November 4 and 5, 1991, Corona met with AUSA Arthur Zucker and Agents of the Department of Labor. Under the protection of a proffer agreement, he provided information about Pelullo and Compton Press.
Special Agent Ruffino testified at the Rule 104 hearing that agents from Newark traveled to Florida in the Fall of 1991 at the direction of AUSA Zucker, conferred with Special Agent Wood and obtained six boxes of original documents from the FBI search of the Miami warehouse. These boxes were taken to Newark. They relate to the Compton Press financial dealings which are the subject of the indictment in the present case.
Special Agent Ruffino used certain of these documents in the preparation of the case against Pelullo and Corona, and some of them were offered in evidence at the Rule 104 hearing.
In response to Corona's July 1995 Kastigar meadow, the United States Attorney's Office in Newark created a "Chinese Wall" designed to insulate the attorneys responsible for the present case from material which might be deemed to have been derived from information which Corona provided to the government personnel in Florida. AUSAs Lewis S. Borinsky and Mark Costello were assigned to deal with the Kastigar and privilege motions and were directed not to disclose to others in the office information which is the subject of those motions.
AUSA Mark W. Rufolo was assigned to the case in February 1995. In his affidavit, he states that he learned most of the background concerning the prosecution from AUSA Jose Sierra, who was previously responsible for the case and from investigative agents assigned to the case. AUSA Rufolo states that he learned of the existence of the documents seized from the Florida warehouse and that he has inspected a limited number of those documents, none of which appeared to be privileged. He has not read the affidavit in support of the search.
AUSA Rufolo states that he has not read transcripts of the Florida state or federal grand jury testimony and that except for the Florida documents, "on no occasion has any Assistant United States Attorney, government agent, or witness provided me with any information, lead, or advice derived from information provided by Raul Corona in the Middle District of Florida." Further, he asserts that except for documents seized in the Florida search, "all of the evidence to be presented by the Government at the trial of United States v. Raul Corona derives entirely from sources independent of the information provided by Raul Corona pursuant to letter-immunity in the Middle District of Florida."
Special Agent Wood executed an affidavit in which he described the investigation in which he was involved in October 1991. It concerned allegations of fraud upon the Bankruptcy Court, Middle District of Florida "and related matters involving Leonard Pelullo, his associates, and a group of companies, including . . ." the companies listed included several which figure in the Compton Press employee benefit fund embezzlements, for example, Olympia Acquisition, One Plaza Corp., Compton Press, Inc., Webb Press, Inc., Away to Travel South, Ocean Properties, Inc., Silver Sands Investments.
Special Agent Woods stated that "pursuant to this investigation I received information from many sources, including Raul Corona, a former business associate of Leonard Pelullo." He further stated, "I have never disclosed in any manner the substance of any statement made to me by Raul Corona to Agent Ruffino, Assistant United States Attorneys Mark W. Rufolo, Leslie Faye Schwartz and Jose P. Sierra, with former Assistant United States Attorney Arthur Zucker, or with any other person ...