Further seeking to watertight their criminal case against James Merrill and Carlos Wanzeler, the Department of Justice (DOJ) has asked the Massachusetts District Court to order a stay on discovery in the SEC’s civil trial.

The primary reason behind the request is the belief that Merrill and Wanzeler will use the discovery process in the civil trial to undermine due process and legal procedures in the DOJ’s criminal case.

Without a stay, Merrill and perhaps Wanzeler – charged in both actions – would use the civil discovery process in a manner that impairs proper administration of the criminal case.

This is not a theoretical concern: for example, depositions and interrogatories targeting the key percipient witnesses in both matters would nullify the Jencks Act and most other criminal rules; broadly disclose the essentials of the government’s trial case at an early stage, thus allowing the defense to tailor factual and legal defenses to fit the anticipated proof; and needlessly harass and intimidate the witnesses themselves, who are civilians (not law enforcement personnel).

The DOJ puts forth that their case should take precedence over the SEC’s, because

realistically, the criminal case will be resolved before (the SEC civil case, and) that resolution will dramatically impact the result (of the civil case).

The criminal case against TelexFree will operate under a specific set of discovery and procedural rules honed over decades and centuries to balance state and personal interests.

But that balance is upended, and thus the public’s and potential victims’ rights impacted, if the defendant is able to use civil discovery to evade the criminal rules.

For example, a conviction in the criminal case could have an estoppel effect as to the civil liability of Merrill and Wanzeler (TelexFree itself has already effectively conceded liability in its answer to the complaint).

For those unfamiliar with the phrase “estoppel effect” (I know I certainly wasn’t), the
Wikipedia entry on it
states

In law, estoppel is a set of doctrines in which a court prevents a litigant from taking an action the litigant normally would have the right to take, in order to prevent an inequitable result.

Estoppel occurs when a party “reasonably relies on the promise of another party, and because of the reliance is injured or damaged”.

For example, estoppel precludes “a person from denying, or asserting anything to the contrary of, that which has, in contemplation of law, been established as the truth, either by the acts of judicial or legislative officers, or by his own deed, acts, or representations, either express or implied”.

Basically, the DOJ are stating that if Wanzeler and Merrill go down in the criminal case – that most of the defense arguments likely to be presented in the civil case will be rendered moot.

The DOJ have approached most of the parties in the SEC civil case, with seven of the nine defendants assenting to a stay of discovery.

Faith Sloan is holdin

🤖 Quick Answer

What is the DOJ's position on discovery in the TelexFree civil case?
The Department of Justice requested the Massachusetts District Court to stay discovery proceedings in the SEC's civil trial against James Merrill and Carlos Wanzeler, arguing that defendants would exploit civil discovery to undermine the criminal case's legal procedures and violate the Jencks Act through depositions targeting key witnesses.

Why does the DOJ consider this request necessary?
The DOJ contends that without a discovery stay, defendants charged in both civil and criminal proceedings would strategically use civil discovery mechanisms to impair proper administration of the criminal case and compromise witness testimony protections established under federal criminal rules.

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- DOJ oppose Merrill’s proposed November trial delay
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