Stays in Parallel Proceedings

For example, prosecutors moved to stay an SEC action in Arizona on the familiar ground that civil discovery would give the defendants a “road map” of the government's criminal case, allowing them “to tailor their defense to what others say about them.” The court rejected this argument and denied the motion, finding the mere fact that the defendants would get more information in civil discovery did not constitute the specific prejudice required for a complete stay. The government's “generalized concern” did not outweigh the defendants' interest in quickly resolving the SEC case. SEC v. Fraser, No. 09 Civ. 443, Order (D. Ariz., May 29, 2009).

Similarly, Judge Frederic Block in Brooklyn denied a government petition to enjoin an arbitration that would include testimony from government witnesses in a related criminal case. The government argued that the arbitration would disclose the names of the government's witnesses, creating a risk that the defendants would ask the witnesses to testify falsely in the criminal trial, and reveal the government's case. The court rejected both arguments, reasoning that because the defendants were going to learn the witnesses' identity before trial anyway, the arbitration wouldn't increase any perjury risk. And the fact that the defendants would be better armed to find weaknesses in the government's case, like inconsistencies between a witness's arbitration and trial testimony, would not “prejudice” the government because those weaknesses are “legitimate fodder for the defense.” According to the court, the government's arguments failed because criminal discovery rules are designed to guard against perjury and witness intimidation, not “to enshrine a tactical advantage in favor of the government.” United States v. FINRA, 607 F. Supp. 2d 391, 393-94 (E.D.N.Y. 2009).