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United States v. Gurry

United States District Court, D. Massachusetts

January 17, 2019

UNITED STATES OF AMERICA
v.
MICHAEL J. GURRY, RICHARD M. SIMON, SUNRISE LEE, JOSEPH A. ROWAN, and JOHN KAPOOR, Defendants.

          MEMORANDUM AND ORDER ON DEFENDANTS' MOTION TO COMPEL PRODUCTION OF GRAND JURY MATERIALS

          ALLISON D. BURROUGHS U.S. DISTRICT JUDGE.

         Currently pending before the Court is Defendants' motion to compel disclosure of the legal instructions the Government provided to the grand jury. [ECF No. 547]. For the reasons stated below, the motion is DENIED.

         I. BACKGROUND

         A. The Indictment

         On September 11, 2018, a grand jury returned the Second Superseding Indictment (“SSI”) against Defendants Michael Babich, Alec Burlakoff, Michael Gurry, Richard Simon, Sunrise Lee, Joseph Rowan, and John Kapoor, charging them with engaging in a racketeering conspiracy in violation of 18 U.S.C. § 1962(d). [ECF No. 419].

         The following allegations are drawn from the SSI. [ECF No. 419]. The Defendants held executive management positions at Insys Therapeutics, Incorporated (“Insys”), a pharmaceutical company that manufactured, marketed, and sold a fentanyl spray called Subsys. [ECF No. 419 ¶¶ 16-22]. Insys constitutes the enterprise underlying the RICO conspiracy. [Id. ¶ 1]. From about May 2012 through about December 2015, the Defendants and their co-conspirators sought to increase profits for the enterprise and for themselves by conducting the affairs of the enterprise including through bribes, fraud, and the illicit distribution of Subsys in violation of 18 U.S.C. § 1962(d). [Id. ¶¶ 23, 26]. As part of the conspiracy, Defendants and their co-conspirators agreed that a co-conspirator would commit at least two acts of racketeering activity, including mail fraud, wire fraud, honest services fraud, and offenses involving the distribution of controlled substances. [Id. ¶¶ 24-25].

         A. Defendants' Motion

         Defendants argue that allegations omitted from the SSI demonstrate that the prosecution improperly instructed the grand jury either on the law regarding the alleged predicate crimes or on the law of RICO conspiracy generally. [ECF No. 548 at 1]. They believe that they should be able to review the Government's legal instructions to determine if these contentions have merit. [Id. at 2, 4-5].

         Defendants make three arguments about the omitted allegations. First, they contend that the SSI fails to allege “that Defendants agreed with alleged co-conspirator practitioners to divert Subsys for the purpose of non-medical or ‘street' usage” [id. at 6] and that such an omission indicates that the Government “misunderstand[s] . . . the proof needed to show a [Controlled Substances Act (“CSA”)] violation” and consequently “erroneously instructed the grand jury on the elements of a CSA violation” [id. at 7]. Second, Defendants argue that the SSI does not allege “the source of the fiduciary duty” underlying the honest services fraud claims [id. at 8] or “that Defendants intended for practitioners to deceive anyone” [id. at 9] and that such omissions suggest that the Government gave the grand jury incorrect instructions regarding honest services fraud. Third, Defendants assert that the SSI fails to aver “that Defendants agreed for anyone to affirmatively lie to insurance companies about the financial arrangement between Insys and practitioners, or that anyone at Insys concealed that information from insurers” [id. at 10] and that such omissions imply that “prosecutors misinstructed the grand jury that an omission without more can constitute a scheme to defraud” [id. 9-10].

         B. Government's Opposition

         The Government responds that the SSI is legally sufficient and that Defendants have not met their burden of showing a particularized need that would justify production of the legal instructions to the grand jury. [ECF No. 611 at 1-2]. Specifically, the Government argues that the SSI is “facially valid because it pleads the elements of RICO conspiracy” [id. at 6-7] and that such elements do not include an agreement by Defendants “that a conspirator would commit each of the specified types of racketeering acts” [id. at 8-10] or “that some conspirator commit each element of those offenses” [id. at 10 (internal quotations omitted)]. The Government also contends that it “was not required to allege the elements of the predicate racketeering acts in the indictment” and that such an omission does not indicate that the grand jury was improperly instructed regarding those predicate crimes. [Id. at 11-12].

         II. DISCUSSION

         A. Legal Standard

         Federal Rule of Criminal Procedure 6(e) imposes an absolute obligation of secrecy regarding grand jury proceedings, with some very limited exceptions. Fed. R. Crim. P. 6(e). One of these exceptions provides that the court “may authorize disclosure . . . of a grand jury matter . . . at the request of a defendant who shows that a ground may exist to ...


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