Case 1:18-cr-00204-NGG-VMS Document 517 Filed 04/09/19 Page 1 of 5 PageID #: 5449

April 9, 2019

VIA ECF

The Honorable Nicholas G. Garaufis

United States District Judge
United States District Court
Eastern District of New York
225 Cadman Plaza East
Brooklyn, NY 11201

Re: United States v. Raniere, et al., 18 Crim. 204 (NGG)

Dear Judge Garaufis:

We write respectfully on behalf of Kathy Russell to respond to and clarify certain

issues raised by the Court yesterday regarding Ms. Russell’s pending motion to dismiss.
Specifically, in light of Your Honor’s preliminary findings that Ms. Russell was “in
effect a target of the investigation” at the time of her grand jury testimony and that the
government’s statements to the contrary were “misleading, at the very least” (Apr. 8,
2019 Tr. (“Tr.”) at 6-7), we now write to clarify the ways in which Ms. Russell was
prejudiced by that misrepresentation, and to explain further why dismissal of the
indictment is the appropriate remedy under the circumstances.

The Supreme Court has made clear that dismissal of an indictment is warranted
when (1) prosecutorial misconduct “substantially influenced the grand jury’s decision to
indict,” or (2) “if there is grave doubt that the decision to indict was free from the
substantial influence of such violations.” Bank of Nova Scotia v. United States, 487 U.S.
250, 256 (1988) (quoting United States v. Mechanik, 475 U.S. 66, 78 (1986)). Here, there
is ample evidence in the record to satisfy the Bank of Nova Scotia standard. Certainly, at
a minimum, the Court should conduct further inquiry into the grand jury proceedings in
order to determine whether the government’s misconduct “influenced” the decision to
indict.

First, there is no doubt that the government’s misrepresentations and misleading

conduct affected how Ms. Russell responded to the government’s questions. It is
criminal defense 101 for a lawyer to determine her client’s status before any grand jury
appearance. See American Bar Association, Preparing a Grand Jury Witness: Sweaty
Palms, Racing Heartbeat (May 26, 2017),
https://www.americanbar.org/groups/litigation/publications/litigation_journal/2010_11/su
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Hon. Nicholas G. Garaufis
April 9, 2019
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mmer/preparing_grand_jury_witness/; Jay A. Brozost & Lawrence S. Goldman, Grand

Jury Investigations: A Guide for In-house Counsel (July/August 2003),
https://www.nacdl.org/WorkArea/DownloadAsset.aspx?id=19966. For this reason, many
courts presume that a witness and her counsel rely upon that information in deciding how
to proceed. As the district court in Drake explained, any “representation by an AUSA
that an individual is neither a target nor a subject, but only a fact witness in that
investigation, communicates information to several parties – counsel, individuals
testifying before the Grand Jury, the Grand Jury, and this court – upon which those
parties rely and act.” United States v. Drake, 310 F. Supp. 3d 607, 621-22 (M.D.N.C.
2018).

The factual record also makes clear that the government’s misrepresentations
affected Ms. Russell’s conduct in the grand jury. As set forth in counsel’s sworn
declaration and the corresponding motion papers (ECF No. 284 (“Harris Decl.”) ¶ 5; ECF
No. 293 (“Mot.”) at 11; ECF No. 315 (“Reply”) at 2) Ms. Russell’s former attorney,
William Fanciullo, learned from other counsel involved in the case that some grand jury
subpoenas had been accompanied by advice of rights forms and subject or target letters,
and reasonably concluded, based on the absence of such notice with Ms. Russell’s
subpoena, that the government viewed Ms. Russell as only a witness. The government
confirmed counsel’s conclusion as to Ms. Russell’s status when, at the outset of Ms.
Russell’s grand jury appearance, it informed her – inaccurately – that she was not a
target. Under these circumstances, where counsel and Ms. Russell were both deliberately
duped, counsel was not able to provide effective advice. For this reason, the
government’s argument that Ms. Russell was represented by counsel at the time of her
grand jury testimony is hardly compelling.

At any evidentiary hearing, Ms. Russell would be prepared to submit a sworn

declaration – or testify – that, based on conversations with her counsel, she believed that
the government viewed her only to be a witness, and that the prosecutor’s statements to
her at the outset of her grand jury testimony provided additional assurance. 1 It is
common sense that a witness who has been reassured that they are not in the
government’s sights would agree to waive her Fifth Amendment rights. And the
transcript of Ms. Russell’s grand jury testimony bears this out. For much of her
appearance – when she believed she was merely a witness – Ms. Russell repeatedly
waived her rights and gave statements on an array of topics, many of which made clear
that she was close to and had knowledge of NXIVM and its operations. 2 At 4:05 p.m. –

1
At any such hearing, both parties would presumably be expected to present evidence as
to whether and how the government’s misstatement impacted the grand jury’s decision to
indict.
2
As the Court knows, she did not answer every question. Rather she asserted her Fifth
Amendment rights approximately 50 times between the start of her grand jury testimony
at 2:30 and the first break at 4:05 p.m.
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after one and a half hours of sometimes aggressive questioning on sensitive topics that
seemed to implicate Ms. Russell directly – there was a break in the proceedings, and Ms.
Russell had an opportunity to consult with counsel. After that break, Ms. Russell
invoked the Fifth Amendment in response to nearly every question posed – 32 times in
the span of just ten minutes. In other words, despite the government’s initial
misrepresentations about her status, the actual questioning made her realize that she was
in fact a target, and she did what any properly advised target would do – she refused to
incriminate herself any further.3

Ultimately, however, it should not be Ms. Russell’s burden to prove that the
government’s affirmative misstatements in fact caused her to waive her Fifth Amendment
rights more liberally. It is impossible to speculate a year after the fact whether Ms.
Russell would have answered any or all of the questions differently had she been properly
advised of her status as a target. Indeed, most courts recognize the danger of erroneously
assuring a witness that she is neither a target or subject, see United States v. Babb, 807
F.2d 272, 278-9 (1st Cir. 1986) (such misrepresentation is “quite troublesome,”
“unprofessional and worthy of severe condemnation”); Drake, 310 F. Supp. 3d at 636
(such misrepresentation is “very concern[ing]”), precisely because of the inevitable risk
that such misrepresentation will impact both the lawyer’s advice and a defendant’s
ultimate decision as to how to proceed. See e.g., Brozost & Lawrence S. Goldman,
Grand Jury Investigations: A Guide for In-house Counsel (July/August 2003),
https://www.nacdl.org/WorkArea/DownloadAsset.aspx?id=19966 (“[T]he category in
which the client is put will influence how the matter is best handled.”)

Second, as set out at length in our motion papers, the prejudice to Ms. Russell and
the grand jury process was twofold. Not only did Ms. Russell’s answers “furnish a link
in the chain of evidence needed to prosecute” her (Mot. at 14 (citing United States v.
Drake, 310 F. Supp. 3d 607, 635-36 (M.D.N.C. 2018)), 4 her selective invocation of the
Fifth Amendment in front of the same grand jury that was ultimately asked to return an
indictment against her was unquestionably damaging. In fact, standing alone, Ms.
Russell’s invocation of her rights raises a “grave doubt that the decision to indict was
free” from such improper influence. Bank of Nova Scotia, 487 U.S. at 256. It is so
universally accepted that jurors – whether petit or grand – will draw a negative inference
from the assertion of the Fifth Amendment that curative instructions are always required

3
United States v. Haak, 884 F.3d 400, 409 (2d Cir. 2018), referenced by the Court
yesterday, does not concern misconduct in the grand jury, but rather decides whether
statements made to law enforcement authorities in the course of a non-custodial interview
should be suppressed based on coercion.
4
Ms. Russell gave statements on a variety of topics including her involvement with
NXIVM since 2001, her position as proctor and coach, the various NXIVM curriculums
she completed, and descriptions of NXIVM-related entities and events. (Mot. at 14).
Such statements showed that Ms. Russell was close to and had knowledge of NXIVM
operations, seemingly putting her closer to Keith Raniere’s “inner circle.”
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upon a defendant’s request. See e.g., Carter v. Kentucky, 450 U.S. 288, 303 (1981) (“No
judge can prevent jurors from speculating about why a defendant stands mute in the face
of a criminal accusation, but a judge can, and must, if requested to do so, use the unique
power of the jury instruction to reduce that speculation to a minimum.”). Indeed, when it
is known that a witness will assert the Fifth Amendment – as anyone deemed a “target”
would be expected to do – the United States Department of Justice’s U.S. Attorney’s
Manual (“USAM”) specifically provides that in these circumstances “the witness
ordinarily should be excused from testifying.” USAM § 9-11.154.

While the government has asserted “the grand jury in this case was properly
instructed” (Tr. at 16), it is unclear what instruction could overcome the extraordinary
negative inference any juror would draw from Ms. Russell’s selective – indeed, almost
“hodge-podge” – assertion of the Fifth Amendment. Moreover, the natural but improper
negative inference the grand jurors likely drew was compounded by the government’s
incorrect legal advice regarding the scope of the Fifth Amendment privilege (Mot. at 15-
16), which misled both Ms. Russell and the grand jury itself into believing that if she was
“simply a witness to a crime,” she could not have a “reasonable fear of prosecution” and
therefore could not “simply invoke the Fifth Amendment.” (Grand Jury Tr. at 9).
Finally, especially in light of its prior misrepresentations to this Court that Ms. Russell
was not a target, there is no reason to take at face value the government’s assertion that
“the grand jury in this case was properly instructed . . . that they could not hold against
Ms. Russell any invocation of her Fifth Amendment rights.” (Tr. at 16). Rather, the
Court should direct the government to produce those instructions – at minimum for in
camera review – before making any finding with respect to the impact of the
government’s misrepresentation.

Nor can the Court, on the current record, conclude that Ms. Russell’s waiver of
the Fifth Amendment did not “substantially influence” the grand jury’s decision to indict.
See Bank of Nova Scotia, 487 U.S. at 256.5 The fact that the government has stated that
the same evidence was available through other means is irrelevant unless it actually
presented that evidence to the grand jury. Similarly, that the government had evidence in
its possession that made Ms. Russell chargeable with tax and visa fraud crimes (thereby
making her a “target”), does not answer the question of whether the grand jury’s decision
to indict her for RICO conspiracy was “substantially influenced” by Ms. Russell’s partial
waiver, and selective invocation, of her Fifth Amendment rights. To make an appropriate

5
In Court yesterday, Your Honor suggested that the test for prejudice was whether Ms.
Russell’s grand jury testimony was “the basis for her indictment” or the “first step in a
chain of evidence that led to her indictment.” (Tr. 8). Although it is impossible to make
such a finding without the full grand jury transcript, the appropriate standard is the
“substantial influence” test articulated in Bank of Nova Scotia, namely, an indictment
must be dismissed “if there is ‘grave doubt’ that the decision to indict was free from the
substantial influence” of the government’s misconduct. 487 U.S. at 256.
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finding under Bank of Nova Scotia, therefore, the Court should direct the government to
produce those portions of the grand jury proceedings that relate to Ms. Russell so that the
impact of her grand jury appearance can be evaluated in the context of the other evidence
presented.6

Misleading a witness about his or her status before the grand jury is serious. See
e.g., United States v. Crocker, 568 F.2d 1049, 1055 (3d Cir. 1977) (misrepresentations
regarding a defendant’s status are “quite troublesome”). Cf. United States v. Jacobs, 547
F.2d 772, 774–75 (2d Cir. 1976) (suppressing grand jury statements when Strike Force
prosecutors failed to provide target warnings, explaining it is court’s “duty to avoid
uneven justice in the circuit”); United States v. Gillespie, 974 F.2d 796, 802 (7th Cir.
1992) (“[F]ailing to adhere to internal policy . . . undermine[s] the Department of
Justice’s commitment to fairness.”). Thus, a full inquiry into the circumstances of the
government’s misrepresentation is required not only to ascertain its impact on the fairness
of the proceedings, but also to deter such misconduct in the future. Cf. United States v.
Hasting, 461 U.S. 499, 505 (1983) (“The purposes underlying use of the supervisory
powers” include providing “a remedy designed to deter illegal conduct.”).

Here, in order for the Court to evaluate whether the government’s misleading
statements substantially influenced the grand jury’s decision to indict, the government
should immediately produce: (1) whatever Fifth Amendment instructions were given to
the grand jury, including any directing the grand jury not to draw a negative adverse
inference from Ms. Russell’s repeated and selective invocation of her rights; and (2) all
of the evidence relating to Ms. Russell, both documentary and testimonial, that was
presented to the grand jury.

We appreciate the Court’s consideration.

Respectfully submitted,

/s/ Justine A. Harris

Justine A. Harris
Amanda Ravich

cc: All Counsel (via ECF)

6
Indeed, when a grand jury has been improperly exposed to immunized testimony, it is
the government’s burden to prove that there was sufficient evidence to indict absent the
taint of the immunized testimony. Kastigar v. United States, 406 U.S. 441, 460-62
(1972). See also United States v. Allen, 864 F.3d 63, 99–100 (2d Cir. 2017) (“[I]f the
government has presented immunized testimony to the grand jury, the indictment should
be dismissed unless the government establishes that the grand jury would have indicted
even absent that testimony” (citation omitted)).