United States of America v. Rafael Martinez, 22 Cr. 251 (LJL) — Transcript of February 17, 2023 Proceedings Before Judge Lewis J. Liman (Doc. 59)
- Issuer
- UNITED STATES DISTRICT COURT
- Document type
- Indictment
- Date
- 2023-03-01
- Case
- Ppp Fraud Prosecutions
Summary
Transcript of a February 17, 2023 proceeding in United States v. Rafael Martinez, 22 Cr. 251 (LJL), before Judge Lewis J. Liman of the U.S. District Court for the Southern District of New York, filed March 1, 2023 as Document 59 in Case 1:22-cr-00251-LJL. The defendant is arraigned on the superseding indictment and pleads not guilty. Defense counsel Telemachus P. Kasulis argues that Count One, a wire fraud charge, should be dismissed as resting on alleged deception of the Small Business Administration to obtain approval for MBE to run a non-bank PPP business, and asks in the alternative to move for a bill of particulars. AUSA Katherine C. Reilly responds that the government's theory has always concerned capital and lender fees rather than regulatory approval. The court keeps the May 1 trial date and says it will decide the particulars request quickly.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Cite this document
“United States of America v. Rafael Martinez, 22 Cr. 251 (LJL) — Transcript of February 17, 2023 Proceedings Before Judge Lewis J. Liman (Doc. 59).”
UNITED STATES DISTRICT COURT, dated 2023-03-01. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/17-23-2023-ppp-fraud-prosecutions-d11ddf42-1/
, SHA-256 d11ddf423fd4653906720443cf22d40d3c8abdf3d59497aaee750b73e6709c05.Full text
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1 UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
2 ------------------------------x
3 UNITED STATES OF AMERICA, New York, N.Y.
4 v. 22 Cr. 251 (LJL)
5 RAFAEL MARTINEZ,
6 Defendant.
7 ------------------------------x
8 February 17, 2023
10:10 a.m.
9
10 Before:
11 HON. LEWIS J. LIMAN,
12 U.S. District Judge
13
14 APPEARANCES
15 DAMIAN WILLIAMS
United States Attorney for the
16 Southern District of New York
BY: KATHERINE C. REILLY
17 MICAH FERGENSON
Assistant United States Attorneys
18
MORVILLO ABRAMOWITZ GRAND IASON & ANELLO, PC
19 Attorneys for Defendant
BY: TELEMACHUS P. KASULIS
20 BY: ELKAN ABRAMOWITZ
-AND-
21 WILLKIE FARR & GALLAGHER, LLP (NY)
BY: RANDALL W. JACKSON
22
23
24
25
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1 (Case called)
2 THE DEPUTY CLERK: Starting with counsel for the
3 government, please state your appearance for the record.
4 MS. REILLY: Good morning, your Honor. Katherine
5 Reilly for the government, and with me at counsel table is AUSA
6 Micah Fergenson.
7 THE COURT: Good morning.
8 MR. KASULIS: Good morning, your Honor. Tim Kasulis
9 and Elkan Abramowicz, from Morvillo Abramowicz; and Randall
10 Jackson from Willkie Farr for Mr. Martinez.
11 THE COURT: Good morning.
12 So, we are here today first for the arraignment of
13 Mr. Martinez on the superseding indictment, and then for
14 whatever argument the parties want to make with respect to the
15 motion to dismiss the Count One of the superseding indictment.
16 Let me start with the arraignment.
17 Mr. Martinez, let me address myself to you. Have you
18 received a copy of the superseding indictment?
19 THE DEFENDANT: Yes, your Honor.
20 THE COURT: Have you read it?
21 THE DEFENDANT: Yes, your Honor.
22 THE COURT: Have you discussed it with your lawyer?
23 THE DEFENDANT: Yes, your Honor.
24 THE COURT: Would you like me to read it to you?
25 THE DEFENDANT: No, your Honor.
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1 THE COURT: How do you plead to the superseding
2 indictment?
3 THE DEFENDANT: Not guilty, your Honor.
4 THE COURT: Anything further by way of arraignment
5 that the government would suggest?
6 MS. REILLY: No, your Honor.
7 THE COURT: OK. You may be seated.
8 I have read the papers on the motion to dismiss. It
9 is well briefed and I expect I will be able to issue you an
10 opinion shortly. Is there anything further that the defense
11 would want to add?
12 MR. KASULIS: Just a couple of brief points with the
13 Court's permission? I appreciate it, your Honor.
14 This is not a situation obviously in which we are
15 addressing the original indictment anymore, but I think it is
16 important to keep in mind, and I would suggest for the Court's
17 consideration, that the original theory -- the only theory
18 espoused in the original indictment is that Mr. Martinez
19 allegedly deceived the Small Business Administration in order
20 to obtain its approval for MBE to run the non-bank PPP
21 business. That theory of the prosecution is still at the heart
22 of the revised Count One wire fraud charge in the superseding
23 indictment. The alleged deception of the SBA is the only
24 alleged deception that is spelled out. There are, of course,
25 references to deception of other parties, but we have no idea
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1 who those parties are, we have no idea what that alleged
2 deception was, when it was, what it was about. So, as we say
3 in our papers, your Honor, because the center of the revised
4 Count One in the superseding indictment is still the
5 impermissible, barred-by-Cleveland approach articulated in the
6 original indictments of Count One, we do believe that Count One
7 in the superseding instrument should be dismissed.
8 In the event that the Court has a differing view,
9 because the government has added these additional allegations
10 in Count One, we very much need particulars to be able to
11 prepare a defense for trial.
12 The original indictment has been obtained for the last
13 seven, eight months now I think. We have been preparing our
14 defense in light of those allegations in light of that theory.
15 Whatever you say about Count One in the original indictment, at
16 least it was clear. It was invalid, we submit, but it was
17 invalid in a very clear way. Count One of the superseding
18 indictment, on the other hand, is more opaque and I think
19 purposefully so by the government. We can no longer tell what
20 exactly the government even has a theory about anymore. So, if
21 we are planning to go to trial this year, we very much need
22 assistance in being able to suss out what the government
23 intends to do in its case-in-chief, your Honor.
24 THE COURT: You are going to trial on May 1st. I do
25 have a couple of questions for you.
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1 MR. KASULIS: Certainly, your Honor.
2 THE COURT: First of all, the language that you used
3 was quite specific and I paid attention to it. You used the
4 language spelled out, and what would be helpful to me is what
5 your best case is for the proposition that the specificity that
6 you are asking for is appropriate and required in an
7 indictment. I didn't see it in your papers.
8 MR. KASULIS: I don't think there is, to be candid
9 with the Court. I don't think there is a case that says the
10 level of specificity I am speaking about here, your Honor, is
11 necessary to be spelled out in the indictment as the Court
12 says. I agree. I wish there were such a case, I would have
13 brought it to the Court's attention. But I think what
14 dovetails with that, your Honor, is in a situation in which the
15 government and the grand jury are not spelling out in any
16 greater detail in the indictment for whatever reasons,
17 legitimate or otherwise, strategic or otherwise the government
18 may have, that's all the more reason why particulars are
19 required to allow us to prepare the defense. And, of course, a
20 bill of particulars is well within your Honor's discretion. If
21 it is a complicated case, as the government says in its papers
22 that it is, and it involves a shift, a pivot in the theory from
23 the way it was originally articulated a year ago to the way it
24 is now in the run-up to the trial, we very much need that
25 assistance in order to safeguard Mr. Martinez' Fifth and Sixth
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1 Amendment rights.
2 THE COURT: So, let me ask you a question about your
3 request for particulars. First of all, tell me what it is
4 limited to?
5 MR. KASULIS: I'm sorry. I couldn't hear you, your
6 Honor. I apologize.
7 THE COURT: What is it limited to when you are asking
8 for particulars? Is it limited to just what is in your
9 footnote 4?
10 MR. KASULIS: Yes, your Honor. I think that would be
11 sufficient.
12 THE COURT: And then I guess two related questions.
13 Assuming that I read your footnote 4 as a request to be
14 permitted to make a motion out of time for a bill of
15 particulars, how quickly would you be able to make that motion
16 and why should I be permit it to be made at this point?
17 MR. KASULIS: Your Honor, we can make it in a week.
18 We can certainly get it done in whatever schedule the Court
19 prefers. The question why you should permit it is because I
20 think the original motion schedule was in light of the original
21 indictment. When the government returned a superseding
22 indictment, the Court very graciously gave us permission to
23 file supplementary papers in connection with our motion to
24 dismiss Count One. The bill of particulars issues issue has
25 arisen only in connection with the return of the superseding
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1 indictment. We see the two issues as related because we
2 continue to believe that Count One can be dismissed but if the
3 Court disagrees -- and I understand the Court's concerns about
4 this argument -- if the Court disagrees, the motion for a bill
5 of particulars is only related to the superseding indictment
6 which was returned just a few weeks ago.
7 THE COURT: And to accept that argument I need to
8 accept your underlying proposition that there is a material
9 difference between Count One in the original indictment and
10 Count One in the superseding indictment?
11 MR. KASULIS: I'm not sure if you need to accept it,
12 your Honor. Like, I think you could say I disagree with you,
13 Mr. Kasulis, about whether the shift -- and there is a shift --
14 is material or not.
15 THE COURT: I'm not sure there is a shift but I guess
16 I need to -- you are saying I need to accept that proposition.
17 MR. KASULIS: I am saying, your Honor, there is a
18 shift. In the original indictment the only articulated theory
19 wasn't a legal one, an invalid one, one that the government now
20 I think does not intend to make the centerpiece of their
21 presentation to the jury, the argument barred by Cleveland.
22 They said the SBA was deceived by Mr. Martinez and the
23 property, the thing, the object of that alleged deception was
24 regulatory approval, the ability to run MBE as a going concern.
25 In the superseding indictment, in an obvious attempt
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1 to short circuit it, the Cleveland argument that we had briefed
2 before the Court, they say now, yes, the SBA was deceived.
3 But, also, other parties, who they do not name, are also
4 deceived, and that that is not the only material change, of
5 course, and the property that triggers wire fraud liability or
6 exposure, I suppose, is no longer just the regulatory approval
7 of the small business administration.
8 THE COURT: It was never just -- I mean, you knew from
9 the letter that the government submitted that the property that
10 they believed was subsumed within Count One of the original
11 indictment was not regulatory approval, that it was the capital
12 from the Federal Reserve Bank and the -- capital C -- Company.
13 MR. KASULIS: When you say the letter, your Honor, I'm
14 sorry. Which document?
15 THE COURT: At least from the government's opposition
16 to your original motion.
17 MR. KASULIS: Oh.
18 THE COURT: So you have known for a long time that
19 that was what the government's theory was.
20 MR. KASULIS: But that theory was not articulated in
21 the original indictment.
22 THE COURT: They believe it was, so if I were to side
23 with them it seems to me that your request for particulars
24 would be pretty late.
25 MR. KASULIS: I guess I see the Court's point, that if
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1 we are entirely wrong and we should have foreseen that the
2 government was going to argue to the jury in their
3 case-in-chief the deception of multiple parties beyond the SBA
4 and the object of that deception not just being the ability to
5 run MBE as a business, but also to obtain, through deception,
6 money from the company as they call it in the indictment, and
7 the Federal Reserve, and the fees generated by MBE, as to which
8 you know we have arguments on each point and the Court has seen
9 those, then I take the Court's point. But to be completely
10 frank, your Honor, we view the case in he way that we briefed
11 the case. That's what the indictment said. If the government
12 wanted to raise these other theories, they could do so, and
13 they have done so now in the superseding indictment, but that's
14 why the bill of particulars motion, were the Court inclined to
15 grant me the ability to do one, would be timely.
16 THE COURT: All right. I have got the argument.
17 MR. KASULIS: Thank you, your Honor.
18 THE COURT: Let me hear from the government, anything
19 the government wants me to so know.
20 MS. REILLY: I will be very brief, your Honor. We
21 have briefed the issue extensively and I don't want to go back
22 and rehash them, so I will just touch briefly on the points you
23 have been discussing with Mr. Kasulis.
24 Most importantly, it is certainly the government's
25 position and in fact the case looking back to the superseding
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1 indictment and the indictment before it, that there has been no
2 pivot, no change in theory. The object of the fraud,
3 the millions of dollars in capital and associated lenders'
4 fees, are explicitly called out in the to wit clause in the
5 original indictment, so I think it is disingenuous for the
6 defense to argue that it was news to them that those millions
7 of dollars in fees and capital might have been the object of
8 the charge alleged.
9 The case in this count has always been about property
10 and not approval, and the decision to seek a superseding
11 indictment was in no way a concession to the contrary. In
12 fact, as the government articulated in its letter seeking the
13 Court's permission to seek a superseding indictment before the
14 motion was decided, we made clear that while the to wit clause
15 articulated the scheme as we believe it existed as charged in
16 the original indictment, a scheme to obtain lenders' fees and
17 capital through a variety of false statements made to the SBA,
18 and others, we thought in an abundance of caution it made sense
19 to revise the to wit clause to address any alleged ambiguity
20 that the defense had identified. We have done that now. The
21 core of the scheme, however, remains the same.
22 THE COURT: Why don't you pivot, so to speak, to the
23 request for particulars.
24 MS. REILLY: Absolutely, your Honor. I'm happy to
25 pivot in this case, not having done so earlier.
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1 If the defense seeks particulars, we would seek an
2 opportunity to brief that. As your Honor, of course, is well
3 aware, in a case like this one where extensive discovery has
4 been produced, where there is a detailed complaint that gives
5 notice of allegations, a bill of particulars is rarely granted.
6 I think it is important to note that a bill of particulars
7 cannot and should not be a strategic or discovery device, it is
8 really a question of notice and here, as we have been
9 discussing, the defense has been on notice for quite some time.
10 THE COURT: So, if the defense is making their motion
11 by one week from today, would you be able to put in your
12 response one week from their papers?
13 MS. REILLY: Yes, your Honor.
14 THE COURT: And then let me look at the calendar. So
15 the defense motion for particulars, limited to what is in
16 footnote 4 on page 5 of the letter of February 14th at
17 Docket no. 53, is due the 24th of February, the government
18 response is due March 3, and any reply is due March 7th, and
19 then I will take it on the papers.
20 Is there anything else from the government that we
21 should address today?
22 MS. REILLY: Nothing, your Honor.
23 THE COURT: Anything else from the defense?
24 Mr. Jackson?
25 MR. JACKSON: Thank you, Judge.
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1 Your Honor, at the risk of running headlong into a
2 statement that the Court made a few moments ago, I am going to
3 request that the Court consider if the Court ends up allowing
4 the government to go forward on Count One, which as we have
5 already asserted we don't believe the Court should, we would
6 request that the Court consider whether some additional time
7 might be built into the trial schedule and it is basically for
8 two reasons. One, I think as Mr. Kasulis asserted, we have, in
9 good faith, really have had a very different understanding of
10 what the case was than what is charged in the superseding
11 indictment and for a number of strategic reasons it makes a
12 difference that there is now a new superseding indictment. I
13 will say that the superseding indictment here, I understand
14 what the AUSAs are saying about why they did it, etc., but they
15 requested that the Court not go forward on oral argument on
16 this motion until they superseded, and I submit that that's
17 because they know that had they gone forward with the theory
18 that they are now going forward with on the original Count One,
19 they would have run a severe risk of constructive amendment of
20 the indictment because it is a different case. Putting that
21 aside -- I'm not rearguing that motion -- I'm just saying that
22 some additional time would be extremely helpful to us. I put
23 no fault on the AUSAs for the second point that I want to make
24 about this, but we are still receiving discovery. I think they
25 have, in good faith, been giving us discovery as they have
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1 gotten it and we appreciate it, but we have gotten significant
2 discovery in the last week. I mean, when you combine the
3 discovery situation with the fact that we have a brand-new
4 indictment that, from our perspective, does present a very new
5 theory of the case and I understand AUSA Reilly's point about
6 their theory of notice. That has nothing do with the amount of
7 time that is appropriate for us to have in terms of adequately
8 investigating and preparing for trial.
9 So, if the Court is inclined at all, I think that we
10 obviously want to go forward this year. We have -- I would
11 tell the Court in the numerous cases I have done in this court
12 house I have almost never asked for an extension. In fact,
13 recently we were pressing the government in the opposite
14 direction where we were repeatedly opposing their requests for
15 extensions and arguing for a speedy trial in one of our recent
16 cases because we very much appreciate the scheduling of trials
17 is an important matter and we think it is generally in our
18 client's interest, including in this one, to have the matter
19 resolved in a timely fashion, but we do have an obligation to
20 adequately prepare. And so, we would just ask the Court if the
21 Court decides that the government can go forward on the
22 superseding Count One, to consider whether there are any dates
23 slightly later in the year where the Court would be willing to
24 go forward with the trial on that schedule.
25 THE COURT: I will hear from the government in a
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1 moment.
2 Mr. Jackson, with respect to your first basis for an
3 adjournment of the trial, I reject it. I don't know
4 subjectively what the defense was thinking about the original
5 indictment, but I do know that reading the original indictment
6 the defense should have anticipated what was contained in the
7 superseding indictment. The argument that was made on the
8 motion to dismiss the original indictment was very well done.
9 I'm not sure that it would have been meritorious but it was
10 very well done in trying to pigeonhole the original indictment
11 into language that would have made it invalid under Cleveland.
12 Again, I don't know that the original argument would
13 have succeeded, but the fact that you framed an argument so
14 that it would fit within the Cleveland case does not mean to me
15 that when the indictment is amended to make it even more clear
16 that it was not a Cleveland case that there is some kind of
17 prejudice. But, the issue of discovery is one that I will hear
18 from the government on as well as the request for an
19 adjournment.
20 MS. REILLY: Your Honor, on discovery, we have been
21 making ongoing productions of discovery on a rolling basis as
22 soon as we receive it and, of course, as is almost always the
23 case that in the lead-up to trial there are materials that roll
24 in beyond our control and we produce them as quickly as we can.
25 I don't think that that discovery has been voluminous and
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1 particularly compared to the core of the discovery, the e-mail
2 search warrant, the e-mail productions, the other subpoena
3 productions which were produced very promptly upon indictment.
4 So, I don't think there is anything about the discovery
5 situation in this case that there is need for an adjournment or
6 differentiates it from any other similarly situated case.
7 In terms of the adjournment, I anticipate that the
8 government would oppose such an adjournment. If there is a
9 formal request being made I would like to take a moment to
10 discuss it with my colleague and look at everyone's trial
11 schedules, but I believe that this case is ready for trial and
12 should proceed to trial on May 1, as scheduled.
13 THE COURT: I'm going to confer with my deputy for a
14 moment, if you want to confer with your colleague you can. I'm
15 very much disinclined to grant an adjournment.
16 From the government's perspective, remind me how long
17 the trial is.
18 MS. REILLY: I would anticipate about two weeks, your
19 Honor.
20 THE COURT: And I suspect that, Mr. Kasulis, that you
21 are not going to be able to tell me whether there is a defense
22 case.
23 MR. KASULIS: Not yet, your Honor. I'm sorry.
24 THE COURT: OK.
25 (Pause)
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1 THE COURT: Does the government have a position?
2 MS. REILLY: Your Honor, as imagined, we oppose the
3 request for adjournment, we think it should go forward on May
4 1.
5 (Pause)
6 THE COURT: So, what I can do is move the trial three
7 weeks later to May 22, if that would work for the government
8 and for the defendants.
9 MS. REILLY: Your Honor, AUSA Fergenson has preplanned
10 international travel for two weeks beginning around Memorial
11 Day so that date would not work for the government.
12 THE COURT: OK.
13 MR. JACKSON: I do want to say those additional weeks
14 would be helpful to the defense and I didn't want to step on
15 the international travel, but I will just -- it is entirely
16 possible that we will have no defense case but I don't think
17 that you could reasonably plan for trial on Memorial Day
18 regardless because we very well may have a defense case. We
19 have had defense case in my last three trials that lasted for
20 more than a week, so.
21 THE COURT: I'm going to keep it at May 1. That's the
22 date that I had set. I had set it as a firm trial date. So,
23 I'm going to get the papers on the request for particulars and
24 I will get you a decision on that quickly, and then the other
25 dates are set in the minute entry that I had issued you in
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1 those answers in August.
2 Anything else from the government?
3 MS. REILLY: Nothing further from the government.
4 THE COURT: From the defense?
5 MR. KASULIS: No, your Honor.
6 THE COURT: All right. See you, all. Have a good
7 weekend. Thank you.
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