Failure To Disclose SEC Fraud Investigation of Key Witness Requires Vacation of Convictions

US v. Parker: Parker, his codefendant/appellee Taylor, and his son Brett (a codefendant below, but not coappellee - he's serving two life terms in South Carolina for multiple murder) were convicted of illegal gambling in an operation including at least five people. Parker and Taylor stipulated that they were engaged in a gambling business and that it included a related operation run by Brett and another man. The key issue at trial was whether there was a fifth person involved. The Government sought to meet that burden via other individuals related to Brett, most critically his (now murdered) wife, Tammy. A witness named Staples provided testimony that Tammy was involved in the gambling operation by managing and spending its proceeds. There was some physical evidence corroborating that testimony. The Government also presented evidence that other individuals ("layoff bookies") were involved in the operation. Finally, there was evidence that Brett received "lines" from a separate bookmaker who could be the fifth person.

On the Friday before trial began, Staples told the Government that he was being investigated by the SEC in Utah for fraud. That information was not disclosed to the defense, who did not cross examine Staples when he testified. The day he testified the Government's civil division received a draft complaint from the Utah SEC office alleging fraudulent conduct on Staples's part. The complaint was filed two days after the jury convicted Parker and his codefendants, who finally learned of the SEC investigation the next day. They moved for a new trial on Brady grounds, which the district court denied because the SEC report "was not material to the jury's determination of the defendants' guilt" because Staples's testimony only related to Tammy's role in the operation and the Government's case didn't rely on her to be the fifth person.

On appeal, the Fourth Circuit reversed. The court found that the SEC investigation constituted impeachment evidence (as well as evidence of untruthfulness under FRE 608) that was material because while the jury could have found that someone other than Tammy was the fifth person in the operation, the evidence most strongly linked Tammy to the operation and thus there was "a reasonable probability that at least one juror would have viewed Tammy as the fifth participant." Aside from Staples's testimony, the other evidence linking Tammy to the operation was "minimal." Furthermore, it rejected the Government's arguments that it was under no duty to disclose evidence of an investigation by another agency and that the defendant's knew or should of known of the conduct underlying the SEC investigation. Having said all that, the court made clear that it was vacating the convictions and remanding for further proceedings, not entering judgments of acquittal, as the evidence presented at trial was sufficient to convict.