Case 111-cv-09645-RJS Document 283 Filed 02/10/17 Page 1 of 7 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK U.S. SECURITIES AND EXCHANGE COMMISSION, Plaintiff, -v- No. 11 Civ. 9645 (RJS) ELEK STRAUB, ANDRÁS BALOGH, and ECF Case TAMÁS MORVAI, Electronically Filed Defendants. DEFENDANTS ELEK STRAUB AND ANDRÁS BALOGH S MEMORANDUM OF LAW IN SUPPORT OF MOTION IN LIMINE TO EXCLUDE INTERVIEW MEMORANDA AND MINUTES HOGAN LOVELLS US LLP Robert B. Buehler Lisa J. Fried 875 Third Avenue New York, NY 10022 (212) 918-3000 robert.buehler@hoganlovells.com lisa.fried@hoganlovells.com Counsel for Elek Straub PILLSBURY WINTHROP SHAW PITTMAN LLP William M. Sullivan, Jr. Thomas C. Hill Kristen Baker 1200 Seventeenth Street, NW Washington, DC 20036-3006 (202) 663-8027 william.sullivan@pillsburylaw.com thomas.hill@pillsburylaw.com kristen.baker@pillsburylaw.com Counsel for András Balogh
Case 111-cv-09645-RJS Document 283 Filed 02/10/17 Page 2 of 7 Defendants Elek Straub and Andras Balogh (together, the Defendants ) hereby move in limine to exclude all interview memoranda and minutes that the United States Securities and Exchange Commission (the Plaintiff or the SEC ) seeks to introduce as proposed trial exhibits. The SEC has identified four interview memoranda, which contain summaries of interviews of the Defendants conducted by outside counsel during an internal investigation at Magyar Telekom in 2006. See Sullivan Decl. Ex. A (PX-8001), id. Ex. B (PX-8002), id. Ex. C (PX-8003), and id. Ex. D (PX-8005). These interview memoranda, prepared by attorneys from the law firm White & Case, do not purport to be complete and accurate (i.e., verbatim) transcriptions of the Defendants statements, nor were they adopted by the Defendants. The SEC has also identified minutes from a hearing before the Hungarian National Office for Investigation, at which Mr. Balogh answered a series of questions. See Sullivan Decl. Ex. E (PX-8006). These interview memoranda and minutes constitute hearsay and they do not satisfy any exception to the hearsay rule; accordingly, they must be excluded. BACKGROUND In 2006, Messrs. Straub, Balogh, and Morvai were interviewed by attorneys from the law firm White & Case as part of an internal investigation at Magyar Telekom. Interview memoranda were prepared by the attorneys following the interviews, summarizing what Messrs. Straub, Balogh, and Morvai said. The SEC has listed four such memoranda as proposed trial exhibits PX-8001 PX-8002 White & Case Tamás Morvai Interview Memorandum (April 7, 2006) White & Case András Balogh Interview Memorandum (April 12, 2006) 1
Case 111-cv-09645-RJS Document 283 Filed 02/10/17 Page 3 of 7 PX-8003 PX-8005 White & Case Elek Straub Interview Memorandum (July 26, 2006) 1 White & Case András Balogh Interview Memorandum (September 27, 2006) In 2007, Mr. Balogh was interviewed by a representative of the Hungarian National Office for Investigation, concerning similar topics as those at issue in the Magyar Telekom internal investigation. Minutes of the interview were prepared, summarizing what Mr. Balogh said. The SEC has listed the minutes as a proposed trial exhibit PX-8006 Minutes of Balogh Interview with NBI (November 15, 2007) ARGUMENT The interview memoranda and minutes are inadmissible hearsay i.e., summaries of outof-court statements by the Defendants that the SEC may seek to introduce to prove the truth of the matters asserted therein. In order for the SEC to introduce and rely on the interview memoranda and minutes at trial, it must demonstrate that they satisfy an exception to the general prohibition against hearsay under Federal Rule of Evidence 802. However, the SEC cannot do so. The interview memoranda and minutes are not recorded recollections of the Defendants, and are not business records, which may have made them admissible under the Federal Rules of Evidence. 803(5) and 803(6), respectively. 1 This interview memorandum was introduced as an exhibit during Mr. Straub s deposition (Exhibit 170). None of the other interview memoranda was introduced as an exhibit in any deposition. 2
Case 111-cv-09645-RJS Document 283 Filed 02/10/17 Page 4 of 7 I. The Interview Memoranda and Minutes are not Recorded Recollections of the Defendants Under Rule 803(5), a record is not excluded by the hearsay rule if it (A) is on a matter the witness once knew about but now cannot recall well enough to testify fully and accurately; (B) was made or adopted by the witness when the matter was fresh in the witness s memory; and (C) accurately reflects the witness s knowledge. FED. R. EVID. 803(5). The interview memoranda and minutes are not recorded recollections of Messrs. Straub, Balogh, and Morvai. First, the interview memoranda were not made by the Defendants; rather, they are the work product of attorneys for White & Case. Likewise, the minutes of Mr. Balogh s interview with the Hungarian National Office for Investigation were not prepared by Mr. Balogh. Although a written summary of an interviewee s statement prepared by someone else may be admissible as the interviewee s recorded recollection if it was reviewed and adopted by the interviewee, 2 that did not occur here. With one exception, there is no evidence that the interview memoranda and minutes were reviewed by Messrs. Straub, Balogh, and Morvai. 3 Indeed, one interview memorandum provided that Mr. Morvai was told that he would not have 2 3 See 5-803 Weinstein s Federal Evidence 803.07. The interview memorandum of White and Case s second interview of Mr. Balogh, contains a section regarding [Mr.] Balogh s Comments to the Minutes of His First Interview. See Sullivan Decl. Ex. D (PX-8005) at 2-7. 3
Case 111-cv-09645-RJS Document 283 Filed 02/10/17 Page 5 of 7 an opportunity to review it. 4 More importantly, none of the interview memoranda or minutes was ever formally adopted by Messrs. Straub, Balogh, and Morvai. 5 II. The Interview Memoranda and Minutes are not Business Records Under Rule 803(6), a record is not excluded by the hearsay rule if (A) the record was made at or near the time by or from information transmitted by someone with knowledge; (B) the record was kept in the course of a regularly conducted activity of a business, organization, occupation or calling, whether or not for profit; (C) making the record was a regular practice of that activity; (D) all these conditions are shown by the testimony of the custodian or another qualified witness, or by a certification... ; and (E) the opponent does not show that the source of information or the method or circumstances of preparation indicate a lack of trustworthiness. FED. R. EVID. 803(6). 4 5 See Sullivan Decl. Ex. A (PX-8001) at 3 ( Morvai asked Mastrangelo if minutes of the interview would be provided for him to review, and Mastrangelo replied that although White & Case would likely create an internal memorandum detailing the information he provided in the interview, it was not likely that Morvai would have access to it. ) The comments and corrections noted by Mr. Balogh in his second interview with White and Case do not convert the interview memorandum of his first interview into Mr. Balogh s recorded recollection. It is not clear from the interview memorandum of his second interview when exactly Mr. Balogh reviewed the interview memorandum of his first interview. The two interviews occurred several months apart the first in April and the second in September. If Mr. Balogh had not reviewed the interview memorandum close in time to when the interview occurred in April, the subject matter was arguably not still fresh in his memory. See SEC v. Johnson, 534 F. Supp.2d 63, 66 n.4 (D.D.C. 2008) (noting that it would seem difficult for a memorandum drafted by a witness either one month or three months after the fact to be deemed made or adopted when the matter was fresh in the witness s memory. ). Regardless of when Mr. Balogh reviewed the interview memorandum of his first interview, though, Mr. Balogh took no additional affirmative steps to adopt it as his own. See, e.g., U.S. v. Williams, 571 F.2d 344, 348 (6th Cir. 1978) (witness adopted memorandum drafted by another [b]y signing and swearing to [it] ). 4
Case 111-cv-09645-RJS Document 283 Filed 02/10/17 Page 6 of 7 The interview memoranda are not business records. They are not records kept in the course of a regularly conducted activity of [Magyar Telekom]. FED. R. EVID. 803(6)(b); see also E.E.O.C. v. UMB Bank Financial Corp., 558 F.3d 784, 793 (8th Cir. 2009) (internal investigation notes should not have been considered business records under 803(6)). Rather, they were prepared as a result of an out-of-the-ordinary and wholly unfamiliar situation at Magyar Telekom an internal investigation conducted by a U.S. law firm. To the extent that the minutes of Mr. Balogh s interview with the Hungarian National Office for Investigation may constitute a business record, the SEC would have to introduce the testimony of the custodian or another qualified witness, or a certification regarding the conditions surrounding the making of the minutes to prove it. Unless that occurs, the SEC may not introduce these interview minutes as a trial exhibit. 5
Case 111-cv-09645-RJS Document 283 Filed 02/10/17 Page 7 of 7 Conclusion For the foregoing reasons, the Defendants respectfully request that the Court exclude the interview memoranda and minutes from evidence. Dated February 10, 2017 Respectfully submitted, /s/ William M. Sullivan, Jr. William M. Sullivan, Jr. Thomas C. Hill Kristen E. Baker Pillsbury Winthrop Shaw Pittman LLP 1200 Seventeenth Street, NW Washington, DC 20036-3006 (202) 663-8000 william.sullivan@pillsburylaw.com thomas.hill@pillsburylaw.com kristen.baker@pillsburylaw.com Counsel for András Balogh /s/ Robert Buehler Robert B. Buehler Lisa J. Fried Hogan Lovells US LLP 875 Third Avenue New York, NY 10022 (212) 918-3000 robert.buehler@hoganlovells.ocm lisa.fried@hoganlovells.com Counsel for Elek Straub 6