Opinion
03 Cr. 1471 (HB)
May 27, 2004
OPINION ORDER
Defendants David Klein, Isaac Dayan, and Pinhas Ben-Ari move pursuant to Federal Rules of Criminal Procedure ("Fed.R. Cr. P.") 7(f) and 12(b) for an order that, inter alia, dismisses Count Two of the indictment on the grounds that it is impermissibly vague and duplicitous. For the reasons set forth below, the defendants' motion is denied.
Defendants Klein and Ben-Ari joined Dayan's motion to dismiss Count Two of the indictment.
The defendants' moved alternatively for a bill of particulars and to compel discovery. This portion of the defendants' motion was granted in part and denied in part for the reasons stated on the record during oral argument on March 15, 2004.
I. BACKGROUND
Defendants Klein, Dayan, and Ben-Ari — owners and/or operators of diamond businesses in Manhattan's "Diamond District" — have been indicted for conspiracy to commit bank fraud, in violation of 18 U.S.C. § 371 and 1344(2), and bank fraud, in violation of 18 U.S.C. § 1344(2). According to the allegations contained in the indictment, from at least January 2000 to April 2001, the defendants and co-conspirators agreed to exchange and did, in fact, exchange a large number of checks with a combined face value of tens of millions of dollars amongst their various businesses. These checks were purportedly legitimate payments for purchases, but are alleged to have been mere transfers of funds between the defendants and their businesses, which were orchestrated to artificially inflate their bank account balances and/or sales figures to falsely maintain, renew, and increase lines of credit for their businesses. The defendants allegedly set up triangles or multi-point exchanges to conceal their illegal activity. Not too surprisingly, the Government alleges that the agreement and exchange of these checks constituted a scheme to defraud financial institutions, including the Commercial Bank of New York, The Merchants Bank of New York, North Fork Bank, HSBC Bank, and Fleet National Bank.
The "Diamond District" refers to the "wholesale and retail diamond businesses operated on 47th Street between Fifth and Sixth Avenues in New York, New York." Indictment ¶ 1.
18 U.S.C. § 371 provides:
If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both.18 U.S.C. § 1344(2) provides in pertinent part:
Whoever knowingly executes, or attempts to execute, a scheme or artifice . . . to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises; shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
All three defendants are charged with the conspiracy and substantive bank fraud charges in Counts One and Two of the indictment. Klein is the only defendant subject to a second substantive bank fraud charge in Count Three.
The Government filed a sealed complaint against defendants on October 9, 2004, at which time Magistrate Judge Dolinger issued bench warrants for their arrest. A Grand Jury returned a true bill against the three defendants on December 15, 2004. The defendants were arraigned on December 17, 2004, at which time they pleaded not guilty to the charges against them. Thereafter, the defendants filed the instant motion to dismiss and the Court held oral argument on March 12 and 15, 2004.
II. DISCUSSION
The defendants move to dismiss Count Two of the Indictment — the substantive bank fraud charge against all three defendants — on the grounds that it is impermissibly vague and duplicitous. I address the defendants' arguments seriatim, although the two challenges substantially overlap to the extent that they both are grounded on the alleged lack of particularity.
A. Vagueness
Defendants first contend that Count Two is deficient because its lack of particularity constitutes constitutionally inadequate notice. Specifically, the defendants argue that Count Two does not identify the checks alleged to be fraudulent, by whom and to whom the checks were drafted, upon which accounts they were drawn, how precisely the checks were allegedly fraudulent, and which financial institutions were allegedly victimized as a result. There is, however, no requirement under Second Circuit case law that the indictment provide such detail. See United States v. Stavroulakis, 952 F.2d 686, 693 (2d Cir. 1992). Indeed, pursuant to Fed.R.Cr.P. 7(c), an indictment "must be a plain, concise, and definite written statement of the essential facts constituting the offense charged." Therefore, under Second Circuit law, "an indictment need do little more than to track the language of the statute charged and state the time and place (in approximate terms) of the alleged crime."Stavroulakis, 952 F.2d at 693 (internal quotation marks and citation omitted); see also United States v. Zandstra, No. 00 Cr. 209, 2000 WL 1368050, at *3 (S.D.N.Y. Sept. 20, 2000) (holding that a mail fraud count was sufficient where it tracked the statutory language, alleged a use of the mails, and identified the approximate time frame and nature of the scheme).
Count Two of the Indictment charges:
From in or about January 2000 through in or about April 2001, in the Southern District of New York and elsewhere, DAVID KLEIN, ISAAC DAYAN, and PINHAS BEN-ARI, the defendants, unlawfully, willfully, and knowingly executed and attempted to execute a scheme and artifice to defraud financial institutions and to obtain moneys, funds, credits, assets, securities, and other property owned by, and under the custody and control of, financial institutions whose deposits at all relevant times were federally insured, including, among others, The Merchants Bank of New York, North Fork Bank, and HSBC Bank, all of which had branches in New York, New York, by false and fraudulent pretenses, representations, and promises, to wit, DAYAN, KLEIN, and BEN-ARI exchanged checks between and among bank accounts located at various banks in order to artificially inflate the account balances of one or more of the bank accounts, and to withdraw funds from one or more of such accounts as a result of the artificially inflated account balances.
Indictment ¶ 10.
These minimal requirements reflect the fact that an indictment's essential purpose is to inform the defendant of the charges levied against him. See United States v. Russell, 369 U.S. 749, 767 (1962); United States v. Dhinsa, 243 F.3d 635, 667 (2d Cir. 2001). Therefore, "an indictment is sufficient if it, first, contains the elements of the offense charged and fairly informs a defendant of the charge against which he must defend, and, second, enables him to plead an acquittal or conviction in bar of future prosecutions for the same offense." Hamling v. United States, 418 U.S. 87, 117 (1974). Count Two of the indictment comports with these basic requirements. The charging language tracks the statutory language and identifies the basic nature and object, as well as the approximate timeframe and location, of the alleged scheme to defraud. The language in the count further identifies a few of the financial institutions allegedly defrauded as a result. The Second Circuit has upheld indictments that presented substantially the same categories of information. E.g.,United States v. Alfonso, 143 F.3d 772, 776 (2d Cir. 1998);Stavroulakis, 952 F.2d at 693-94.
The defendants, however, insist that the indictment must "descend to particulars" and provide significantly greater detail. This proposition is firmly rooted, but inapplicable to this case. Courts have required a greater degree of particularity "where the definition of an offence, whether it be at common law or by statute, includes generic terms," and the indictment therefore "must state the species" of the offense.United States v. Cruikshank, 92 U.S. 542, 544 (1875). This admonishment, however, has surfaced in cases where the defendant was unable to ascertain the nature of the offense alleged. For example, inUnited States v. Russell, 369 U.S. 749 (1962), the defendant was charged with refusing to answer questions posed by a Senate subcommittee. The Supreme Court held that the indictment was constitutionally deficient because it failed to identify the subject matter of the congressional inquiry and "[a]t every stage of the ensuing criminal proceedings [defendant] was met with a different theory, or by no theory at all, as to what the topic had been." Id. at 768. The indictment utterly failed to inform the defendant of the charges against him and "left the prosecution free to roam at large — to shift its theory of criminality so as to take advantage of each passing vicissitude of the trial and appeal." Id. Under these circumstances, the Court was equally unable to determine whether the defendant's conviction was valid, i.e., whether he refused to answer questions that pertained to the subject of the congressional inquiry.Id. at 755, 768-69.
In United States v. Pirro, the Second Circuit upheld the dismissal of an indictment that charged the defendant with having made a false material statement in connection with a federal income tax return pursuant to 26 U.S.C. § 7206(1). The Circuit held that indictment was flawed because it failed to plead "the crucial background fact that g[ave] rise to the duty to disclose the fact that was omitted." 212 F.2d 86, 93 (2d Cir. 2000). This information was of critical importance because "[o]nly the omission of facts required to be reported constitutes a material falsehood." Id. Without these details, the defendant "was not adequately informed of the nature of the accusation against him . . . [and] the grand jury may not have understood the elements of the crime and the evidence necessary to support the indictment." Id. at 95.
In both of these cases, the indictments omitted a material element of the crime charged, which left a definite uncertainty as to both the nature of the offense and whether the conduct at issue was criminal. The same cannot be said of Count Two in this indictment, which pleads all of the necessary elements of the offense and provides a brief description of the nature of the bank fraud scheme, including the applicable timeframe, location, method, object, and some of the alleged participants and victims. This language, together with the allegations in the conspiracy count and the complaint, see United States v. Sturvidant, 244 F.3d 71, 77 (2d Cir. 2001), give the defendants more than an adequate indication of the nature of the crime charged. See, e.g.,United States v. Reddy, No. S3 01 Cr. 58, 2002 WL 1334823, at *6 (S.D.N.Y. June 18, 2002) (rejecting defendant's specificity argument because there was no ambiguity regarding a material element of the offense and the indictment alleged the manner in which the defendant supposedly defrauded the victim, his mental state, and the appropriate statute).
The defendants' claims are certainly not new; indeed, courts in this District have long rejected precisely this type of challenge. See, e.g., United States v. Sullivan, No. S1 02 Cr. 1144, 2004 WL 253316, at *3 (S.D.N.Y. Feb 10, 2004) (observing that "[t]here is no precedent that requires that indictments identify each and every statement the Government might argue at trial is false");Zandstra, 2000 WL 1368050, at *4 (noting that the mail fraud count need not identify the victims of the scheme, the precise mailing dates, or the specific misrepresentations alleged to be fraudulent);United States v. Rufolo, No. 89 Cr. 938, 1990 WL 29425, at *3 (S.D.N.Y. March 13, 1990) (rejecting defendant's argument that the indictment was insufficient because it failed to allege the number, dates, nature, and amount of allegedly false expense claims). They do not, however, compel dismissal of Count Two. The defendants' argument that some of the terminology within Count Two is ambiguous, such as the allegation that defendants "artificially inflated" account balances, is similarly unavailing. It is firmly established that "common sense must control,"Stavroulakis, 952 F.2d at 693, and therefore, language in an indictment is to be given its common and ordinary meaning and "must be read to include facts which are necessarily implied by the specific allegations made," United States v. Silverman, 430 F.2d 106, 111 (2d Cir.), modified by, 439 F.2d 1198 (2d Cir. 1970). Count Two simply does not suffer from vagueness. It comports with the requirements of the Constitution, the Federal Rules of Criminal Procedure, and the case law in this Circuit.
Parenthetically, it should be noted that the indictment language in United States v. Rufolo contained even less detail that provided in Count Two in this case. No. 89 Cr. 938, 1990 WL 294425, at *1 (S.D.N.Y. March 13, 1990) ("From on or about April 1, 1989 up to and including on or about October 23, 1989, in the Southern District of New York, the defendant JOSEPH W. RUFOLO, unlawfully, wilfully [sic], and knowingly did make and present to a person in the civil service of the United States, to a department and agency thereof, claims upon and against the United States, and the United States Department of Labor, knowing such claims to be false, fictitious and fraudulent, that is RUFOLO submitted false claims to the United States Department of Labor for reiumbursement [sic] of travel expenses.").
B. Duplicitousness
The defendants further aver that Count Two's purported lack of specificity creates a danger of duplicity because they cannot determine the number of executions of the scheme alleged and therefore the number of crimes defendants are charged with having committed. Because this challenge is premised on essentially the same ground as defendants' vagueness challenge, it fails for substantially the same reasons.
An indictment is impermissibly duplicitous where it joins more than one crime into a single count and thereby prejudices the defendant.Sturdivant, 244 F.3d at 75; United States v. Aracri, 968 F.2d 1512, 1518 (2d Cir. 1992). As the Government notes, however, Count Two alleges a single scheme to defraud. Indictment ¶ 10 ("the defendants, unlawfully, willfully, and knowingly executed and attempted to execute a scheme and artifice to defraud financial institutions . . ."). The acts that allegedly constituted this scheme may properly be charged in a single count, even if it was possible to charge them separately, so long as they are part of the continuing course of conduct. United States v. Tutino, 883 F.2d 1125, 1141 (2d Cir. 1989); see also Zandstra, 2000 WL 1368050, at *5 (rejecting defendant's duplicity argument because the Government appropriately pleaded each mailing as part of a single scheme to defraud even though each mailing could have constituted a separate violation of the statute); United States v. Weissman, No. S2 94 Cr. 760, 1996 WL 742844, at *26 (S.D.N.Y. Dec. 20, 1996) (ruling that the indictment count was not duplicitous because "[e]ach of the acts [was] directed at the same goal, and thus they may be seen as part of a continuing scheme.").
The cases upon which the defendants base their duplicity argument further support this proposition. E.g., United States v. King, 200 F.3d 1207, 1212-13 (9th Cir. 1999) ("[W]hile these independent acts probably could constitute separate offenses, Count One alleges only a single execution of the fraudulent scheme. Thus, the indictment is not duplicitous.") (emphasis in original); United States v. Hammen, 977 F.2d 379, 383 (9th Cir. 1992) ("[E]ach execution need not give rise to a charge in the indictment."). The defendants argue that this type of aggregation is permissible only where the indictment alleges sufficient facts. This, however, is not supported by the case law. None of the cases cited by the defendants explicitly require — or even mention — the necessary degree of factual particularity. Indeed, as discussed above, courts have routinely held that the Government isnot required to provide details simply because they constitute the details sought by the defendants. E.g. Sullivan, 2004 WL 253316, at *3; Zandstra, 2000 WL 1368050, at *4;Rufolo, 1990 WL 29425, at *3.
Not only is aggregate pleading permissible, it may well be desired. As the Second Circuit has observed, any requirement that acts be pleaded separately whenever possible could very well result in cumulative punishment. United States v. Margiotta, 646 F.2d 729, 733 (2d Cir. 1981); United States v. Agnese, No. 85 Cr. 1198, 1986 WL 5108, at *2 (S.D.N.Y. 1986) (holding that the policy concerns that underlie the duplicity doctrine were not implicated because the aggregation of multiple offenses involving the same conduct into a single count served to limit defendant's exposure to liability); see also United States v. Gordon, 990 F. Supp. 171, 178 (E.D.N.Y. 1998) (same). Moreover, failure to plead a single scheme to defraud could lead to a multiplicity challenge, i.e., that the indictment charged multiple crimes that were in law and fact the same crime. E.g., United States v. Harris, 79 F.3d 223, 231 (2d Cir. 1996) ("[Defendant] contends that the six bank fraud counts, which corresponded to the six extensions of the [loan] agreement, should have been charged as a single count. . . ."); see also United States v. Poliak, 823 F.2d 371, 371 (9th Cir. 1987) ("[Defendant] brought a motion to require the [G]overnment to elect or consolidate the counts arguing the indictment was multiplicitous because it charged a single scheme to defraud in ten separate counts.").
Even if the aggregation of the individual acts comprising the alleged scheme were impermissible, the defendants would still have to demonstrate prejudice to prevail on their duplicity challenge. United States v. Murray, 618 F.2d 892, 897 (2d Cir. 1980) ("If the doctrine of duplicity is to be more than an exercise in mere formalism, it must be invoked only when an indictment affects the [underlying] policy considerations."). The defendants claim that they are prejudiced because they cannot adequately determine the nature and extent of the crimes charged and thus may not be able to interpose a plea of double jeopardy. The defendants further argue that that the current language of Count Two could lead to difficulties at sentencing and that there is a danger that the jury could reach a unanimous verdict on Count Two without a unanimous decision about which checks were fraudulent.
There is, however, no merit to any of these contentions. As discussed above, the defendants do have constitutionally adequate notice and their assertion that they would be unable to raise a double jeopardy claim is simply untenable. Count Two, together with the language of the complaint and the indictment as a whole, adequately outlines the contours of the alleged scheme. Moreover, as I indicated in the April 14, 2004 Pre-Trial Scheduling Order, correspondence to counsel, and on the record during oral argument, the Government will provide the defendants with a schedule of checks in electronic format that outlines, at minimum, the allegedly fraudulent checks, as well as the identity of the alleged co-conspirators, the businesses, the bank accounts, and the financial institutions mentioned in Count Two. This will provide the defendants with more than adequate information to prepare their defense. See Gordon, 990 F. Supp. at 178 (ruling that defendant could not claim lack of notice or difficulty in raising a double jeopardy claim where he had ample access to the Government's theory of the case).
Finally, any concern about the jury's unanimity regarding the specific checks can be cured, if the defendants so request, by a special interrogatory, Zandstra, 2000 WL 1368050, at *5;Weissman, 1996 WL 742844, at *26; Rufolo, 1990 WL 29425, at *3, or a special instruction regarding the unanimity requirement for each false check, Sullivan, 2004 WL 253316, at *5; Gordon, 990 F. Supp. at 179. The defendants' argument regarding the impropriety of such a step is unpersuasive, for the very case they rely upon to oppose a special interrogatory approved of precisely this safeguard because it was to the defendant's advantage.Margiotta, 646 F.2d at 733 (noting that while special verdicts are generally disfavored in criminal cases, there was no reason why the district court could not submit a special interrogatory to the jury for the jury to identify the unanimously agreed-upon mailings with respect to a mail fraud offense). The defendants' duplicity challenge is therefore also without merit and defendants' motion to dismiss is denied.
III. CONCLUSION
For the foregoing reasons, the defendants' motion to dismiss Count Two of the indictment is denied. The Clerk of the Court is instructed to close this motion and any remaining open motions.