Irving H. Picard v. Sage Associates

Background

A bench trial was scheduled to begin on January 19, 2022. Defendants moved to prevent Irving H. Picard, the trustee in the liquidation proceedings for Bernard L. Madoff Investment Securities LLC, from introducing an FBI interview report known as a Form 302 report. They also sought to exclude testimony by FBI Special Agent Theodore Cacioppi about the report.

The report summarized statements Bernie Madoff made during a December 16, 2008, proffer session with the government after his arrest. According to the report, Madoff said that he stopped engaging in actual trading soon after the retail business began, that the business operated as a Ponzi scheme, and that the fraud expanded during the 1970s and 1980s. Madoff later gave deposition testimony that contradicted some of those statements, including testimony that the fraud began in the 1990s.

The underlying consolidated actions concern the trustee’s effort to avoid and recover allegedly fraudulent transfers made by Bernard L. Madoff Investment Securities LLC to defendants. The trustee sought to recover $13,510,000 transferred to Sage Associates and $3,370,000 transferred to Sage Realty, and sought joint and several liability against Malcolm Sage, Martin Sage, and Ann Sage Passer. Defendants argued that they should receive credits for securities positions reported on their customer statements because they had directed and authorized specific securities transactions.

Legal standards

A motion in limine asks the court to decide before trial whether anticipated evidence may be admitted. The court explained that it should exclude evidence on such a motion only when the evidence is clearly inadmissible on every potential ground.

The court also addressed hearsay within hearsay. Under Federal Rule of Evidence 805, each level of hearsay must qualify for its own exception. Here, the first level was the FBI report itself, and the second level was Madoff’s statements as recorded in the report by Special Agent Cacioppi.

Analysis

The court ruled that the FBI report was admissible under the public-record exception in Federal Rule of Evidence 803(8). Special Agent Cacioppi testified that FBI policy required agents to prepare a Form 302 report after a proffer session. The court therefore found that the report recorded matters observed while the agent had a legal duty to report them.

The defendants argued that the report was not trustworthy because Madoff later contradicted it in his deposition. The court rejected that argument. It noted that the statements were made during a voluntary proffer session at the beginning of the government’s criminal investigation and that Madoff had been told that lying during the session was itself a crime. The court concluded that the later deposition testimony did not fatally undermine the report’s trustworthiness.

The court separately ruled that Madoff’s statements qualified under Federal Rule of Evidence 804(b)(3)(A), which allows certain statements against the interests of an unavailable person. Madoff was unavailable because he had died on April 14, 2021. The court also found that his statements about the scope and duration of his fraud exposed him to significant criminal liability. It rejected defendants’ argument that the statements required corroborating circumstances showing trustworthiness, explaining that this corroboration requirement applies when the statement is offered in a criminal case, not this civil case.

Disposition

The court concluded that the Form 302 report, Madoff’s statements recorded in it, and Special Agent Cacioppi’s testimony were admissible under separate hearsay exceptions. Judge John F. Keenan therefore denied defendants’ motion in limine and directed the Clerk of Court to terminate the motion at docket number 41.