Opinion
Criminal Action No. 04-370.
October 24, 2004
MEMORANDUM
The following defendants have filed motions to the dismiss their indictments: Glenn K. Holck; Stephen M. Umbrell; Anthony C. Snell; Francis D. McCracken; and La-Van Hawkins. Defendant Charles LeCroy has moved to dismiss the indictment or strike portions of the indictment. Because briefing on the motion of Defendant McCracken is not completed, the Court reserves judgement; for the reasons that follow, the motions to dismiss or strike are denied as to the remaining defendants.
This Court held oral argument on all of the motions to dismiss on October 13, 2004.
I. The Indictment
The indictment alleges that Ronald A. White, a Philadelphia attorney, gained control in 2002 and 2003 over the decision-making of Philadelphia City Treasurer Corey Kemp, through illicit payments and other benefits and promises extended to Kemp. White allegedly used that control to influence the award of city contracts to himself and to companies which favored White with favors, gratuities, contributions, and other remuneration.
A. Defendants Holck and Umbrell
The indictment charges that Glenn K. Holck, the president of Commerce Bank/Pennsylvania, N.A. ("Commerce Bank"), and Stephen M. Umbrell, the regional vice-president of Commerce Bank, conspired with and assisted White in providing benefits to Kemp, including otherwise unavailable loans extended by Commerce to Kemp. ¶ 3. The indictment states:
6. Defendants GLENN K. HOLCK and STEPHEN M. UMBRELL, on behalf of their employer, Commerce Bank, both directed benefits directly to KEMP, and knowingly took advantage of WHITE's corrupt relationship with and control over KEMP. In or about June 2002, Commerce Bank placed WHITE on its Board of Directors. Throughout 2002, and until October 2003, Commerce Bank paid $15,000 per month to WHITE apart from his compensation for serving on the Board, and made other payments to favor his interests. In return for all of this compensation, WHITE directed KEMP to take action on Commerce Bank's behalf. HOLCK and UMBRELL knew that KEMP unduly favored Commerce Bank due to the influence WHITE exerted and the benefits that HOLCK and UMBRELL extended to KEMP with the intent to influence KEMP's official actions.
Holck and Umbrell are charged with conspiracy to commit honest services fraud, in violation of 18 U.S.C. § 371 (Count 1); eight counts of honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346 (Counts 15-22); and one count of honest services mail fraud, in violation of 18 U.S.C. §§ 1341 and 1346 (Count 23).
18 U.S.C. § 371 states:
§ 371. Conspiracy to commit offense or to defraud United States 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. § 1343 states:
§ 1343. Fraud by wire, radio, or television
Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
18 U.S.C. § 1346 states:
§ 1346. Definition of "scheme or artifice to defraud"
For the purposes of this chapter [ 18 U.S.C. §§ 1341 et seq.], the term "scheme or artifice to defraud" includes a scheme or artifice to deprive another of the intangible right of honest services.
B. Defendants LeCroy and Snell
Charles LeCroy and Anthony C. Snell were officers of J.P. Morgan Chase ("JPMC"), a large financial institution, who attempted to develop municipal finance business for the company in Philadelphia. The grand jury has not alleged that they were part of the conspiracy with White, or aware of the corrupt means by which White obtained influence and control over city decision-making, but they are alleged to have been generally aware of White's influence and attempted to enlist it on JPMC's behalf.
Toward this end, according to the indictment, JPMC made contributions to charities favored by White, and also retained him as an attorney for particular legal matters. Count 1, ¶ 72. However, the company chose not to hire him as a "consultant." ¶ 78. In the municipal securities field, a consultant is one who advocates on a company's behalf to gain business from municipalities. Securities regulations require public exposure of all consultant relationships, and the political contributions made by such consultants, in order to assure that any effort by a securities firm to gain political access through outside contractors, is publicly known. See Municipal Securities Rulemaking Board Rule G-38.
MSRB Rule G-38, states in relevant part:
The term "consultant" means any person used by a broker, dealer or municipal securities dealer to obtain or retain municipal securities business through direct or indirect communication by such person with an issuer on behalf of such broker, dealer or municipal securities dealer where the communication is undertaken by such person in exchange for, or with the understanding of receiving, payment from the broker, dealer or municipal securities dealer or any other person; provided, however, that the following persons shall not be considered consultants for purposes of this rule: (A) a municipal finance professional of the broker, dealer or municipal securities dealer; and (B) any person whose sole basis of compensation from the broker, dealer or municipal securities dealer is the actual provision of legal, accounting or engineering advice, services or assistance in connection with the municipal securities business that the broker, dealer or municipal securities dealer is seeking to obtain or retain.
The indictment charges that LeCroy and Snell, to gain White's assistance, evaded J.P. Morgan's decision not to use White as a consultant, by paying him $50,000 for legal work he was not retained to perform and never performed. ¶ 73. LeCroy and Snell allegedly asked White to provide an invoice representing that JPMC owed White $50,000 for "professional services" in connection with a bond issuance underwritten by JPMC in Mobile, Alabama. Although knowing that he was not owed this money, White allegedly created the invoice and collected the money from the firm. LeCroy is alleged to have deceived his superior in order to gain approval of the invoice. ¶¶ 74-78.
Counts 26 and 27 allege that White, LeCroy and Snell committed wire fraud through this scheme, and defrauded JPMC of $50,000. The indictment states that the defendants acted for their personal benefit, in that White received $50,000, and he used his influence to attempt to secure business for JPMC in Philadelphia, from which LeCroy and Snell could benefit. The indictment states, however, that the payment violated municipal securities regulations and was contrary to JPMC's purpose and intent. Id.
C. Defendant McCracken
Francis D. McCracken is the pastor of the St. James Chapel Church, Church of God in Christ, in Reading, Pennsylvania. The indictment alleges that he participated with co-defendant Corey Kemp and others in two fraudulent schemes. First, the indictment charges that Kemp and McCracken made false statements to Commerce Bank in order to secure an advance of over $115,000 on a $480,000 loan to the church (for which officers of Commerce waived a number of normal loan requirements in an effort to influence Kemp's decisions as Treasurer of the City of Philadelphia), and then used some of the proceeds for their personal purposes. With respect to this scheme, they are charged with three counts of making false statements to a bank, in violation of 18 U.S.C. § 1014 (Counts 41-43), and four counts of money laundering, in violation of 18 U.S.C. § 1956(a)(1)(B)(I) (Counts 44-47) Second, the indictment alleges that Kemp and McCracken made false statements to the Pennsylvania Department of Public Welfare in order to personally profit from a state program which aimed to assist welfare recipients in securing employment. The indictment presents six counts of mail fraud relating to this scheme, in violation of 18 U.S.C. § 1341 (Counts 48-53).
Because the briefing on defendant McCracken's motion to dismiss is not completed, the Court will not rule on it in this Memorandum.
D. Defendant Hawkins
La-Van Hawkins is charged in the indictment with conspiracy to commit honest services fraud, in violation of 18 U.S.C. § 371 (Count 1); two counts of honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346 (Counts 2 and 5); two counts of wire fraud in the Kahn scheme, in violation of Section 1343 (Counts 24 and 25); and four counts of perjury before the grand jury, in violation of 18 U.S.C. § 1623 (Counts 37-40). The motion before the Court seeks to dismiss Counts 1, 2, 5, 24 and 25.
The indictment alleges that Hawkins assisted in a conspiracy to commit honest services fraud and committed substantive honest services fraud by acting as a conduit for two $5,000 payments which Hawkins allegedly gave to Kemp, at White's behest, in 2002. Count 1, ¶¶ 13-15. It is further alleged that Hawkins provided Kemp with a free trip on a private airplane from Philadelphia to Los Angeles in January 2003, as part of a trip to the Super Bowl arranged for Kemp by White, ¶¶ 20-21; and Kemp attended a party hosted by Hawkins for White in Detroit, ¶ 26. The indictment states that Kemp did not disclose any of these benefits, as required by state and local law. ¶¶ 1(d), 12.
The indictment charges:
35. Defendant COREY KEMP received all of the payments, benefits, loans, gratuities, and other rewards described both above and later in this indictment, from defendants RONALD A. WHITE, GLENN K. HOLCK, STEPHEN M. UMBRELL, LA-VAN HAWKINS, and others, with the knowledge that all of these benefits were given with the intent to influence him in the performance of his official duties. Moreover, KEMP regularly took discretionary actions in matters concerning those who provided these benefits to him, without recusing himself or disclosing his conflict of interest.
36. In addition, KEMP did not disclose any of these benefits on the public disclosure forms he was required by law to file. Specifically, KEMP was required to file three disclosure forms covering 2002, two with the City and one with the Commonwealth of Pennsylvania. Each of these forms, which KEMP filed in or about April and May 2003, required KEMP to disclose the two $5,000 payments he received from WHITE and HAWKINS, as well as the meals, tickets, and other gratuities KEMP received from WHITE and others during 2002. However, KEMP omitted all of this information on each of the forms.
The indictment further alleges that, without revealing his conflict of interest, Kemp took official actions to benefit the interests of White and other conspirators. Specifically with regard to Hawkins, Kemp allegedly attended a meeting in May 2003 at which he purported to represent the City and advise a person with whom Hawkins wished to do business that the City would consider financial backing for Hawkins' transaction, when Kemp had no authority to participate in this meeting or make any such representation. ¶¶ 83-93.
Counts 24 and 25 allege a scheme in which Kemp was enlisted "to deceive a person with whom HAWKINS wished to do business into believing that HAWKINS had the available funds to engage in the transaction." Count 1, ¶ 83. On May 6, 2003, Hawkins allegedly asked White to bring Kemp to a meeting with a person, Aslam Kahn, from whom Hawkins wished to buy fastfood restaurants and make a quick profit of several million dollars. Hawkins stated that he needed Kemp "to keep this guy in the hole, so you know what I'm saying, I'm talking that we going to be getting 20 million." ¶ 86. At the meeting on May 8, according to the indictment, "HAWKINS falsely told Kahn that the state had given HAWKINS $100 million to make a deal to buy the Church's franchises." ¶ 89.
II. Motion of Defendants Holck and Umbrell to Dismiss the Indictment
Defendants Holck and Umbrell move, pursuant to Fed.R.Crim.P. 12(b), to dismiss the charges against them on the ground that the indictment fails to state an offense. The defendants argue that the indictment does not state a theory of "honest services" mail or wire fraud that falls within the definition of conduct proscribed by 18 U.S.C. §§ 1341, 1343 and 1346, as interpreted by the United States Court of Appeals for the Third Circuit.
The mail and wire fraud statutes apply to the defrauding of another of the "intangible right of honest services." 18 U.S.C. § 1346. This was considered a valid mail fraud theory for over 40 years, before the Supreme Court held to the contrary inUnited States v. McNally, 483 U.S. 350 (1987). Congress acted promptly to restore the concept in Section 1346, which went into effect on November 18, 1988. Wire fraud has three elements: (1) a scheme to defraud, (2) use of the wires in furtherance of the scheme, and (3) a specific intent to deceive or defraud. See United States v. Syme, 276 F.3d 131, 142 n. 3 (3d Cir. 2002) (vacating a conviction and remanding for a new trial on the theory of fraud). A scheme to defraud includes the scheme to deprive "another of the intangible right of honest services." 18 U.S.C. § 1346. A public or private person can be charged with honest services fraud under either the wire or mail fraud statutes. In the public sector, this fraud is premised on the notion that governmental officials act as trustees for the citizens for whom they serve. See United States v. Sawyer, 239 F.3d 31, 39 (1st Cir. 2001) (vacating a False Claims Act conviction).
See supra, note 3.
There are two types of honest services fraud, one involving quid pro quo bribery ("Theory 1"), and the other involving a failure to disclose a conflict of interest resulting in the defendant's personal gain ("Theory 2"). United States v. Antico, 275 F.3d 245, 263 (3d Cir. 2001). A conflict of interest arises where there is a fiduciary duty to disclose information the public would want to know. This duty is often defined by state and local ethics laws. Id.
The briefs on the pending motions reveal a sharp dispute between the government and the defendants with respect to whether the facts alleged in the indictment satisfy the requirements of either of the two theories of honest services fraud: the defendants contend that the indictment is insufficient under either theory, whereas the government insists that both theories are properly pled. For the reasons that follow, this Court finds valid all counts of the indictment against defendants Holck and Umbrell.
A. Honest Services Fraud in the Third Circuit
Generally, there must be some statutory legal basis to support an intangible honest services fraud claim. In Antico, for example, the defendant worked at the Department of Licenses and Inspections for the city of Philadelphia. In granting permits and licenses for the department, Antico failed to disclose a business arrangement he had with a girlfriend with whom he had fathered two children. To fulfill a private child support arrangement, he agreed to refer clients to her and approve the permits and applications she submitted to his office. Id. at 253-54. The court found that the defendant's duty to disclose this information (to potential permit and license applicants) arose under both state and local law. Id. at 263. "Antico neither publicly disclosed a conflict of interest nor disqualified himself from taking official action," and as a result of the arrangement, his girlfriend earned over $700,000 in fees. Id. at 254.
The Philadelphia conflict of interest statute at issue, Section 20-607, stated in relevant part:
Unless there is public disclosure and disqualification . . ., no City officer or employee shall be financially interested in any legislation, including ordinances and resolutions, award, contract, lease, case, claim, decision, decree or judgment made by him in his official capacity . . ., nor shall any financial interest be held by a parent, spouse, child, brother, sister or like relative-in-law, or by any person, firm, partnership, corporation, business association, trustee or straw party for his or her benefit.
In United States v. Panarella, 277 F. 3d 678 (3d Cir. 2001) defendant was the operator of a tax collection business who paid $330,000 in consulting fees to a state legislator, Loeper, who in turn advocated for the defendant before governmental bodies and opposed legislation which would have been detrimental to the defendant. Defendant challenged his conviction on the ground that it failed to allege that the payments were bribes or that the legislator's actions were improperly influenced by them. The Court of Appeals, however, found that no such allegation or proof is required, and the fact that the legislator received the payments while failing, in violation of state law, to disclose them, set forth honest services fraud, regardless of whether the legislator was influenced by the money: "a public official commits honest services fraud if he takes discretionary action he knows directly benefits a financial interest that the official concealed in violation of state criminal law." Id. at 695.
The Third Circuit most recently revisited the doctrine of honest services fraud in United States v. Murphy, 323 F. 3d 102 (3d Cir. 2003). In Murphy, the court found a "need to establish a violation of state law in [honest services fraud] cases to serve as a limiting principle on the federal prosecution of local political actors" and held that "[w]ithout the anchor of a fiduciary relationship established by state or federal law, it was improper for the district court to allow the jury to create one." Id. at 104. The Third Circuit expressly declined to rely on the Second Circuit's decision in United States v. Margiotta, 688 F.2d 108 (2d Cir. 1982). Margiotta was a private individual who was the chairman of the Republican County Committee of Nassau County and also of the Town of Hempstead located therein. It was the theory of the prosecution in Margiotta that the defendant owed a fiduciary duty to the public because others, including local officials, relied on him by reason of his political position. Id. at 112. The Third Circuit in Murphy refused to adopt such an expansive definition of fiduciary relationship. Instead, the court embraced Judge Winter's dissent inMargiotta: "it is an unacceptable leap to allow 'a jury to find that a politically active person has sufficient influence and power over the acts of elective officials to be the subject to the same duty as those officials so far as those acts are concerned.'" Murphy, 323 F.3d at 113 (quoting Margiotta, 688 F.2d at 142 (Winter, J., dissenting)).
The government asserts that the indictment of Holck and Umbrell is valid under both theories of honest services fraud. The Court will address each of those theories in turn.
1. Theory 1: Quid Pro Quo Bribery
Although it is not explicitly articulated in the indictment, the government contends that the indictment nevertheless sufficiently pleads a bribery theory of honest services fraud.See Indictment, Count 1 ¶ 130 (detailing conversations between defendants White and Kemp that allegedly reveal a quid pro quo arrangement). The government further argues that the "indictment explicitly charges that the defendants gave benefits to Kemp in exchange for official decisions[.]" Government's Response to Defendants Holck and Umbrell's Mot. to Dismiss, 13.
However, because the Court rests its decision to deny the motion to dismiss on Theory 2 of honest services fraud, infra, the Court need not rule on whether or not the indictment also properly charges a quid pro quo theory of honest services fraud. The Court will determine at trial whether the government has introduced sufficient evidence of quid pro quo bribery, and if so, the Court will charge the jury accordingly.
2. Theory 2: Failure to Disclose a Conflict of Interest
In discussing Theory 2 of honest services fraud, the Third Circuit in Panarella stated that an official commits fraud where there is "nondisclosure of a financial interest while taking discretionary action that the official knows will directly benefit that interest." 277 F.3d at 695. This statement identifies the two criteria that must be satisfied in order to validly charge someone with honest services fraud: 1) non-disclosure of a financial interest; 2) discretionary action that directly benefits that interest. It is not charged that Holck and Umbrell deprived the public of the intangible right to their honest services, but rather that they attempted to deprive the citizens of the Philadelphia of the intangible right to Corey Kemp's honest services as a public official. They are also charged as part of a conspiracy with White (and others) to deprive the City of the honest services of Kemp.
(a) Non-disclosure of a Financial Interest
Defendants contend that the indictment fails to show that Corey Kemp held a financial interest requiring disclosure under state or local law. The Court disagrees. The indictment alleges a conspiracy, as part of which numerous benefits that flowed from Ronald White to Kemp, as well as from Holck and Umbrell (on behalf of Commerce Bank) to Kemp. Among the benefits allegedly given to Kemp by White was a gift of $10,000. Indictment Count 1, ¶¶ 13-15. Whether or not Holck and Umbrell had personal knowledge of the specific benefits flowing between White and Kemp is of no consequence, since an allegation of conspiracy merely needs to charge that Holck and Umbrell engaged in activity to further the objects of the conspiracy with White. The indictment alleges that Holck and Umbrell helped secure approval of two mortgage loans to Kemp (totaling more than $225,000), which, because of Kemp's poor credit rating, were allegedly "not reasonable and customary extensions of credit." ¶¶ 135-141. The indictment further alleges that Umbrell approved an additional automobile refinancing loan for Kemp, despite Kemp's allegedly "significant credit problems." ¶¶ 142-143.
Though not explicitly requiring an underlying violation of local or state law to provide the basis of honest services fraud, the court in Panarella gave great weight to the fact that the defendant's "nondisclosure was in clear violation of Pennsylvania criminal law." 277 F.3d at 699. Here the indictment alleges that Kemp failed to disclose any of the above described benefits, as required by state law. Indictment Count 1, ¶ 36. The government identifies these statutes in its response brief, and though the defendants insist that the particular statutes must be identified in the indictment itself, the Court finds no such requirement inPanarella or anywhere else in the Third Circuit's honest services fraud jurisprudence. This is a legal issue on which the Court can charge the jury.
"Although we hold that the existence of a violation of state law, coupled with the other facts discussed above, is sufficient to establish honest services wire fraud in this case, we need not decide whether a violation of state law is necessary for nondisclosure of a conflict of interest to amount to honest services fraud." Panarella, 277 F.3d at 699 n. 9.
"Pennsylvania required that Kemp, as a municipal official, file an annual statement of financial interests, 65 Pa. C.S.A. § 1104(a), disclosing the identity of any 'direct or indirect source of income totaling in the aggregate $1,300 or more,' and of 'any gift or gifts valued in the aggregate at $250 or more and the circumstances of each gift,' 65 Pa. C.S.A. § 1105(b)(5), (6). A gift is defined as: 'Anything which is received without consideration of equal or greater value. The term shall not include a political contribution otherwise reported as required by law or a commercially reasonable loan made in the ordinary course of business.' 65 Pa. C.S.A. § 1102. In his state disclosure form for 2002 (as well as his City disclosure forms based on similar rules), Kemp entirely omitted the $10,000 and other gifts he received from White and Hawkins, which aggregated far more than $250 in value, as well as the $225,000 Commerce mortgage which was not commercially reasonable . . .
As the Court observed in Panarella, which concerned the same body of state statutory law, Pennsylvania provides criminal penalties for violation of these statutes. See 65 Pa. C.S.A. § 1109; Panarella, 277 F.3d at 698. Of the statutes cited above, violation of Sections 1103(a), (b), and (c) are felony offenses, while the other statutes present misdemeanor offenses. § 1109; see also Panarella, 277 F.3d at 694 (a misdemeanor offense sufficiently establishes a state interest)." Government's Response to Defendants Holck and Umbrell's Mot. to Dismiss, 24-26. As of the date of this Memorandum, Kemp has not been charged with any state offenses.
From the allegations of the indictment, Kemp's conflict of interest is obvious. At the same time that he is receiving valuable financial benefit from Commerce Bank, he is exercising his discretion as a high City official to direct substantial City business to Commerce Bank. Kemp was under a duty to disclose the financial benefits he has received, but failed to do so. The conduct alleged rises above the mere receipt of financial benefits to a type of fraud which Congress has prohibited in the crime of honest services fraud. The Court therefore finds that the benefits to Kemp outlined above — and detailed in the indictment — do constitute a "financial interest" requiring disclosure within the framework ofPanarella and under Pennsylvania law.
(b) Discretionary Action with Direct Benefit
Under Panarella, an official is guilty of honest services fraud where he "takes discretionary action that he knows directly benefits a financial interest that the official concealed in violation of state law." 277 F.3d at 696. Having already determined that the indictment sufficiently alleges an illegally concealed financial interest, we now turn to the question of whether the indictment properly alleges that Corey Kemp took discretionary action to directly benefit that interest.
In Panarella, discussed above, Loeper "took discretionary action in his official capacity that he knew would benefit his undisclosed financial interest. This action rendered the information that Loeper concealed material, since the public would find the information relevant in assessing Loeper's voting record." Panarella, 277 F.3d at 699. In this case, Kemp is alleged, as part of the conspiracy, to have concealed financial interests that flowed to him from both Ronald White and Commerce Bank (via Holck and Umbrell). The indictment describes numerous actions taken by Kemp in furtherance of the conspiracy, on behalf of both White and Commerce Bank. With respect to Commerce Bank, it is alleged that Kemp took steps to ensure that Commerce Bank secured the "NTI Line of Credit" (Indictment Count 1, ¶ 151). It is further alleged that Kemp, acting at White's behest, secured City deposits and lucrative bond deals for Commerce Bank and Commerce Capital Markets, respectively. Indictment Count 1, ¶¶ 174-193.
Defendants Holck and Umbrell assert that the "direct benefit" required by Panarella is limited to a scenario in which the "official conferring it must effectively put money into his own pocket." Def. Brief in Supp. Motion to Dismiss, 26. Defendants stress that Kemp does not have an "ownership, investment or contractual 'interest' in [Commerce] Bank, pursuant to which his compensation would increase as a result of the City's placing its business there." Id. at 2. Defendants appear to argue that "directly benefits" requires that the benefit be direct from the transaction at issue, such as a specific percentage of the deal, as were the facts inPanarella. This construction is too narrow and is not a requirement under the case law, even if it fit the facts ofPanarella. The defendants' contention that any other interpretation of the word "direct" will render the word meaningless is not supported by the cases discussed above. The phrase "direct benefit" only distinguishes benefits that flow to the official taking the action from benefits that flow to a third party. The indictment clearly alleges that financial benefits, in the form of loans and other favors, flowed from Commerce Bank to Corey Kemp. The indictment likewise alleges that Kemp did not disclose this financial interest and took discretionary action to benefit Commerce Bank. The mere fact that Kemp did not have a financial stake in the transactions he directed to Commerce Bank is not dispositive; a jury could reasonably infer that the more business Kemp directed to Commerce Bank, the more his financial interest — as a potential recipient of favorable loans, for example — would be improved.
The narrowness of defendants' interpretation seems to be due, in part, to their focus on the phrase "financial interest" in Panarella. However, the court in Panarella repeatedly used the broader phrase "financial relationship" in their discussion. 277 F.3d at 681, 684, 690, 691; see also, 277 F.3d at 696 ("The information that Loeper allegedly concealed in this case — his financial relationship with Panarella — was material because at the time Loeper misrepresented the information, he was taking discretionary action that directly benefitted Panarella's business.")
An example of this sort of indirect, third-party beneficiary is discussed in a case described by the defendants thusly: "[The Third Circuit] held that a bank's extension of a loan to a city official's friend in return for the official's deposit of city funds with the bank was not a 'benefit' sufficient to support a federal prosecution." Def. Brief in Supp. of Motion to Dismiss, 27 n. 12 (discussing United States v. Davis, 183 F.3d 231, op. amended, 197 F.3d 662 (3d Cir. 1999)).
Although it is not necessary to reach this issue to decide the pending motion, it is certainly arguable that Kemp's overall relationship with Commerce Bank, which, through Holck and Umbrell, allegedly supplied him with shortcut procedures to favorable loans that his credit history would not have warranted — refinancing of Kemp's automobile, as well as free tickets to sporting events and meals — constituted payments to Kemp because of Kemp's "financial interest" in, or "financial relationship" with, Commerce Bank. A person who merely receives a loan from a bank certainly does not have a "financial interest" in the bank; however, the flow of transactions between Kemp and Commerce Bank, and vice versa, made Kemp more than a simple customer. See Indictment Count 1, ¶¶ 151-193. How much more will be left to the trial.
For the reasons set forth above, the Court finds that the indictment is valid under the requirements established by statute and as construed by the Third Circuit. The motion of defendants Holck and Umbrell to dismiss the indictment will therefore be denied.
III. Motions of Defendants Snell and LeCroy to Dismiss
A. Defendant Snell's Motion to Dismiss
Relying primarily on United States v. D'Amato, 39 F.3d 1249 (2d Cir. 1994), Defendant Snell argues that in order for the indictment to be valid, it must state an intent to harm the alleged victim, J.P. Morgan Chase. Snell contends that the government has not shown the requisite intent to harm because "Snell was plainly acting with the intent to benefit, not to harm, JPMC, the alleged victim" by obtaining future business for the company (Defendant Snell's Memorandum of Law in Support of Motion to Dismiss at 1). Because the challenged conduct resulted in a long-term corporate benefit to JPMC, the defendant argues that the counts against him must be dismissed. For the following reasons, the Court disagrees and will deny Defendant Snell's Motion to Dismiss.
Defendant Snell also points to decisions from the First, Fourth, Fifth, Eighth, Tenth, and D.C. Circuits that have adopted or explained this intended harm requirement. (Defendant Snell's Reply Brief at 2-3).
Although the Third Circuit has never specifically espoused an "intent to harm" the victim requirement, the government concedes that an intent to harm is required pursuant to D'Amato, but argues that it is encompassed by an "intent to defraud." (Government's Response at 12-13; Oral Argument at 78). The government notes that the Third Circuit has always listed an intent to defraud as an element of wire fraud, but never an intent to harm (Oral Argument at 78). See, e.g., United States v. Syme, 276 F.3d 131, 142 n. 3 (3d Cir. 2002) (listing intent to defraud as an element of wire fraud). Accordingly, the government maintains that the indictment satisfies D'Amato because it sufficiently alleges an intent to defraud or harm by charging defendants Snell and LeCroy with arranging a payment for Defendant White in knowing violation of municipal securities violations and contrary to JPMC's expressed decision not to do so.
Because the government has conceded as much, the Court will assume without deciding that an intent to harm the victim is required.
A review of the facts and holding of D'Amato is helpful in deciding the motions currently before the court. D'Amato, like this case, involved the presentation by a lawyer to a client of an allegedly fictitious invoice. In D'Amato, a corporate employee of Unisys hired attorney Armand D'Amato without management authorization to do so. The employee told D'Amato to structure his billings to conceal the true nature of his relationship and the fact that his actual services involved lobbying his brother, a United States Senator. D'Amato, 39 F.3d at 1252. The corporate official never revealed to D'Amato that his actions lacked management authorization. The Second Circuit reversed D'Amato's mail fraud convictions because there was no evidence that he was aware that he was defrauding the corporation, and therefore no evidence of fraudulent intent. Distinguishing someone in corporate management from a person hired to perform services for the corporation, the court found that a person hired to perform services for the corporation "cannot be found to intend to harm a corporation or its shareholders through otherwise lawful misleading conduct if he or she follows the instructions of an appropriate corporate agent who appears to be unconflicted and acting in good faith." Id. at 1258. Despite the fact that D'Amato can be distinguished on its facts and by its procedural posture, its holding still requires that Defendant Snell's Motion to Dismiss be denied.
Distinguishing D'Amato, the Government points out that the facts there most closely correspond to Defendant White's situation, not Defendant Snell's. (Government's Response Brief at 7). Defendants Snell and LeCroy were corporate employees at JPMC at the time of the conduct at issue. Defendant White, like D'Amato, was the person hired to perform services. In addition, D'Amato actually performed services whereas here it is alleged Defendant White performed no work at all. Finally, D'Amato involved the dismissal of the indictment due to the insufficiency of the evidence at trial, not the sufficiency of the indictment itself. D'Amato, 39 F.3d at 1256.
It is noteworthy that, in addition to adopting an intent to harm requirement, the D'Amato court also recognized that "[w]hen the 'necessary result' of the actor's scheme is to injure others, fraudulent intent may be inferred from the scheme itself." Id. at 1257 (citing United States v. Regent Office Supply Co., 421 F.2d 1174, 1181 (2d Cir. 1970)). The court inUnited States v. Fernandez, 282 F.3d 500, 507 (7th Cir. 2002) (distinguishing D'Amato) also pointed out:
Even if D'Amato were the law in this Circuit, defendants ignore the D'Amato court's explanation that fraudulent intent, which is essential to a scheme to defraud, may be inferred from the scheme "when the 'necessary result' of the actor's scheme is to injure others."Id. at 507 (quoting D'Amato, 39 F.3d at 1257).
Considering this caveat in D'Amato along with the required elements of wire fraud, it is possible for a jury to infer that Snell and LeCroy intended to cause JPMC financial or economic harm through a scheme designed to deprive the company of actual monetary assets that could have been put to other uses. See United States v. Tarallo, 380 F.3d 1174 (9th Cir. 2004) (holding that fraudulently intending to take someone's money is intent to harm). Even if the long-term intent was to benefit the company, there could still have been an intent to at least temporarily harm the company by depriving it of assets. See United States v. Menon, 24 F.3d 550, 556 (3d Cir., 1994) (noting that intent to defraud generally requires an intent to deprive someone of property or money). Undoubtedly, the jury could infer that the defendants "cause[d] or intend[ed] to cause actual harm or injury, . . . mean[ing] financial or economic harm." United States v. Pennington, 168 F.3d 1060, 1065 (8th Cir. 1999). This remains an issue for the jury to decide.
To support a conviction for wire fraud, the government must prove beyond a reasonable doubt: 1) the defendant's knowing and willing participation in a scheme or artifice to defraud, 2) with the specific intent to defraud, and 3) the use of interstate wire communications in furtherance of the scheme. See United States v. Syme, 276 F.3d 131, 142 n. 3 (3d Cir. 2002) (noting elements of mail and wire fraud).
For example, JPMC could have invested the $50,000 into projects or other money-making ventures. At the very least, JPMC was allegedly deprived of the $50,000 cash plus any interest that would have accrued.
Defendant seems to be conflating two separate issues: 1) the alleged fraudulent payment of $50,000 and 2) the future business expected because of that payment. Even though there may have been an intent to benefit J.P. Morgan in the long-term by obtaining future business, there could still be an intent to harm the company temporarily with regard to the $50,000 payment.
If the government proves its case, the jury could conclude that because Defendants Snell and LeCroy knowingly violated municipal securities regulations, they "contravened J.P. Morgan's previously stated intent," [referring to allegations in ¶ 3 of the indictment at 97] and deprived JPMC of $50,000, and the requisite intent to harm is met. For the reasons stated, the indictment sufficiently alleges an intent to harm the alleged victim, JPMC, and states charges of wire fraud against Snell and LeCroy. Accordingly, Defendant Snell's Motion to Dismiss will be denied.
B. Defendant LeCroy's Motion to Dismiss or Strike
Defendant LeCroy seeks a partial dismissal of the charges against him or to strike portions of the indictment. Specifically, he argues that the indictment alleges a legally insufficient Multiple Object Wire Fraud. (Defendant LeCroy's Memorandum in Support of Motion to Dismiss at 1). LeCroy maintains that the indictment states three objects of the alleged fraud including:
1. The fraudulent payment of $50,000;
2. The violation of municipal securities regulations; and
3. The violation of corporate policies.
Id. Contending violations of municipal securities regulations and corporate policies are legally insufficient objects of a scheme to defraud, LeCroy has requested that the Court dismiss or strike them from the indictment.
Defendant LeCroy maintains that violations of municipal securities regulations and corporate policies "are not cognizable under the wire fraud statute as charged objects of the scheme" because "the wire fraud statute . . . is limited to schemes to deprive a victim of 'money or property.'" (Defendant LeCroy's Memorandum in Support of Motion to Dismiss at 1).
In support of his motion, LeCroy argues that the "Indictment invites the jury to convict upon legally invalid grounds." (Defendant's Reply at 1). Defendant notes that under controlling Third Circuit case law, if one of two or more alternative theories supporting a count of the conviction is either unconstitutional or legally invalid, then a reviewing court must vacate the jury verdict and remand for a new trial without the invalid or unconstitutional theory. See United States v. Syme, 276 F.3d 131, 144 (3d Cir. 2002) (vacating False Claims Act conviction and remanding for new trial because district court committed plain error constructively amending indictment by instructing jury on fraud theory that was not alleged). Thus, where one object of a multiple object conspiracy is legally insufficient, a conviction must be set aside because it would be unclear on which object the jury made the conviction. Id. Essentially, Defendant LeCroy argues that by not striking the legally invalid objects of the scheme at this time, the court is taking a risk that any conviction will be vacated on appeal.
Moreover, LeCroy claims that the indictment blends together impermissible objects with a permissible one and therefore invites jury confusion. (Transcript, Oral Argument at 74-75). Presented with multiple objects, "jurors are not generally equipped to determine whether a particular theory of conviction is contrary to law." Griffin v. United States, 502 U.S. 46 (1991). Thus, LeCroy argues that the confusing language should be stricken from the indictment in order to make the charges clear to the jury.
In response, the government maintains that the Indictment charges LeCroy with but a Single Object Fraud: engaging in a scheme to defraud J.P. Morgan of $50,000, the sole object of the scheme. (Government's Response at 5; Oral Argument at 82). The indictment states:
It was the object of the scheme described in paragraph 2 for defendant RONALD A. WHITE, at the direction of defendants CHARLES LeCroy AND ANTHONY C. SNELL, to submit a false invoice to J.P. Morgan seeking the payment of $50,000 for legal work which WHITE did not actually perform. Although knowing that this payment violated municipal securities regulations and contravened J.P. Morgan's previously stated intent, the defendants arranged this payment to secure WHITE's assistance in obtaining business for J.P. Morgan in Philadelphia, which could result in personal benefit for LeCroy and SNELL.
Indictment at 97, ¶ 3. The government explains that the mention of violations of municipal securities regulations and corporate policies does not purport to state any additional objects of the scheme, but merely shows defendant's knowledge and intent, elements of the offense. See supra note 5 (listing elements of wire fraud). The language also demonstrates defendant's intent to harm, as required by D'Amato. Thus, the language simply addresses defendant's intent to defraud or intent to harm, not the objective of the scheme. According to the government, the indictment completely sets out all the required elements of wire fraud and in support, alleges defendant's knowledge of securities regulations and corporate policies.
Nevertheless, LeCroy does not believe the jury can make this distinction and will be confused as to the true object of the scheme. Further, defendant doubts that a narrowing jury instruction will be effective to cure the Indictment. (Defendant's Reply Brief at 2). Defendant states:
A court cannot effectively instruct a jury on a narrow theory of an element of the offense when the indictment itself identifies an impermissibly-broad theory of that element. . . . At a minimum, the jury might find itself torn between the written statement in the Indictment and the court's instruction on the law.Id.
The Court disagrees. The Court can carefully instruct the jury to eliminate any confusion surrounding the single object of the alleged fraud. Further, it is not necessarily true, as defendant assumes, that the jury will receive a copy of the indictment in its entirety. In this case, it is unlikely the Court would give the jury the full 150-page indictment. (Oral Argument at 71). Instead, the Court can choose to give the jury portions of the indictment or a summary of the counts, so that the charges are clear. Finally, the disputed language mentioning defendants' knowledge of municipal securities regulations and corporate policies is not only relevant, but arguably required, to allege the requisite knowledge and intent for a charge of wire fraud.See Apprendi v. N.J., 530 U.S. 466, 490 (2000) ("The indictment must contain an allegation of every fact which is legally essential to the punishment to be inflicted.") (quotingUnited States v. Reese, 92 U.S. 214, 232-233(1876)).
For these reasons, Defendant LeCroy's Motion to Dismiss or Strike will be denied.
IV. Defendant Hawkins' Motion to Dismiss
Defendant La-Van Hawkins is charged with conspiracy to commit honest services fraud, in violation of 18 U.S.C. § 371 (Count 1); two counts of honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346 (Counts 2 and 5); two additional counts of wire fraud, in violation of 18 U.S.C. § 1343 (Counts 24 and 25); and four counts of perjury before the grand jury, in violation of 18 U.S.C. § 1623 (Counts 37-40).
18 U.S.C. § 1623 states:
§ 1623. False declarations before grand jury or court
(a) Whoever under oath (or in any declaration, certificate, verification, or statement under penalty of perjury as permitted under section 1746 of title 28, United States Code) in any proceeding before or ancillary to any court or grand jury of the United States knowingly makes any false material declaration or makes or uses any other information, including any book, paper, document, record, recording, or other material, knowing the same to contain any false material declaration, shall be fined under this title or imprisoned not more than five years, or both.
Hawkins' argument in support of his Motion to Dismiss is three-fold. First, he argues that "Counts 1, 2, 5, 24 and 25, as they relate to Mr. Hawkins, must be dismissed because Mr. Hawkins' [sic] neither committed honest services wire fraud nor conspired to commit honest services wire fraud." (Def's Memorandum in Support of Motion to Dismiss at 1). Second, Hawkins argues that Counts 37-40 "must be dismissed because the Government misrepresented Hawkins' status at the time of his appearance before the grand jury." Id. Finally, Hawkins contends that Counts 37-40 "must be dismissed because the particular statements charged therein are not perjurious as a matter of law." Id. For the following reasons, the Court is not convinced by any of these arguments and will deny Defendant Hawkins' Motion to Dismiss.
A. Conspiracy and Honest Services Wire Fraud Charges
Defendant Hawkins argues that Counts 1, 2, 5, 24 and 25 must be dismissed because the activities do not describe a charge of honest services fraud. Relying on United States v. Panarella, 277 F.3d 678 (3d Cir. 2002), Hawkins contends that the counts should be dismissed because there is no allegation that 1) Hawkins provided a bribe or kickback to Defendant Kemp; or 2) that "Kemp, acting in his official capacity, failed to disclose an interest he personally maintained in any Hawkins' venture." (Def. Memorandum in Support of Motion to Dismiss at 2).
As the government points out, Counts 24 and 25 do not charge honest services fraud, but rather, allege a conventional wire fraud committed against Aslam Kahn. (Government's Response at 9). The indictment charges all the necessary elements of wire fraud. (Indictment at 95-96).
See supra note 13 (noting elements of wire fraud).
With regard to Counts 1, 2, and 5, the analysis is similar to that for Defendants Holck and Umbrell. As stated previously, applying Panarella, the indictment states a charge of honest services fraud against Defendant Kemp. Further, Count 1 alleges all the necessary elements to charge Defendant Hawkins with conspiracy. As an alleged co-conspirator, Defendant Hawkins can be charged with the conspiracy as well as the underlying substantive crime. See Pinkerton v. United States, 328 U.S. 640 (1946) (holding that merger doctrine did not apply to conspiracy and underlying substantive offense).
See infra note 20 (listing elements of conspiracy).
Since Pinkerton, it is well-settled that a defendant may be convicted of conspiracy even if one defendant does not agree to commit, or facilitate, each and every part of the substantive offense. Therefore, conspirators can be held liable for the substantive offenses of others committed in furtherance of the conspiracy. See id. at 646 ("So long as the partnership in crime continues, the partners act for each other in carrying it forward."). Thus, the government need not allege or prove an overt act against every member of the conspiracy. Id. It is enough that the Indictment charges Hawkins of knowingly entering into an agreement to commit an illegal act and knowingly consenting to participate in and assist the venture.
To prove a conspiracy under § 371, the Government must prove: 1) the combination of two or more persons; 2) an agreement to commit an illegal act; 3) an unlawful purpose; and 4) an overt act by one of the conspirators in furtherance of the conspiracy.United States v. Uzzolino, 651 F.2d 207, 214 (3d Cir., 1981).
In addition, as Defendant Hawkins' counsel argued for the first time at oral argument, the grand jury did not allege materiality as an element of wire services fraud and thus, the charges must be dismissed. (Oral Argument at 57) (relying on Neder v. United States, 527 U.S. 1, 4 (1999) (holding that materiality is an element of wire fraud)). The government concedes, as it must, that materiality is an element of the federal wire fraud statute; but that the word "materiality" need not appear in the Indictment. Further, the government contends that the Indictment sufficiently alleges facts that are material. (Oral Argument at 58). The court finds this is sufficient.
A review of Neder reveals that the court not only decided materiality is an element of wire fraud, but also, that the jury should decide the issue. Neder, 527 U.S. at 7. Further, the jury must be appropriately instructed. Id. at 4. Thus, Hawkins' argument does not convince the court that the charges against him must be dismissed. B. Defendant Hawkins' Status Before the Grand Jury
The Neder court also noted that the omission of the materiality element from the judge's charge to the jury can be harmless error. Neder, 527 U.S. at 10-11.
Hawkins argues that Counts 37-40, charging him with perjury in connection with his February 24, 2004 testimony before a federal grand jury, must be dismissed because the prosecutor allegedly failed to advise him of his status before he appeared as a grand jury witness. Specifically, he claims he was not told he was a target or a subject. As a result, Hawkins claims, he refrained from retaining counsel experienced in criminal law on the basis of those representations, and his Fifth and Sixth Amendment rights were violated. (Defendant's Memorandum in Support of Motion to Dismiss at 5). Hawkins does not explain how these facts are relevant to the charge of perjury. Hawkins' argument, carried to the logical extreme, would allow grand jury witnesses to lie with impunity merely because the government did not adequately advise them of their status before they testified.
The government alleges that at the time Hawkins' testimony was sought, he was a subject of the inquiry, not a target. (Government's Response at 17). Citing the U.S. Attorneys Manual, the government states that a "subject" — a person whose conduct is within the scope of the grand jury's investigation — need not be told of his status and need only be advised of his constitutional rights (to counsel and to avoid self-incrimination) and of the fact that his testimony may be used against him in a subsequent legal proceeding. (Government's Response at 18, citing U.S. Attorneys Manual § 9.11-151). The government adequately demonstrates that Hawkins was advised of these rights in compliance with these procedures, and that Hawkins did not become a target until after he testified and made false statements. (Government's Response, Exhibit A: Subpoena To Testify, Advice of Rights; Exhibit B: Grand Jury Testimony of La-Van Hawkins at 3-5 (explaining rights and obligations as grand jury witness)). Later, on June 3, 2004, a target letter was sent to Hawkins's counsel, Leonard Mungo, Esq., informing him that Hawkins was now a target. (Government's Response, Exhibit C).
In support of his motion to dismiss, Hawkins relies heavily on the Third Circuit's warning to federal prosecutors in U.S. v. Crocker, 568 F.2d 1049 (3d Cir. 1977) which although holding that suppression of testimony was not warranted where warnings defendant received were adequate to apprise him of his status as target and to inform him of dangers of testifying falsely, contained the following warning to federal prosecutors:
[I]n the future, United States Attorneys in the Third Circuit should not be surprised if, pursuant to our supervisory powers over the manner of conducting grand jury proceedings, we were to follow United States v. Jacobs, [ 547 F.2d 772 (2d Cir. 1976)], especially where, as here, specific inquiry is made on the defendant's behalf.Id. at 1055-56. This warning in Crocker referred to the Second Circuit's "uniform practice of warning target witnesses before grand juries," but concludes that
in view of the warnings actually given and of Crocker's knowledge of the subject of the grand jury's general investigation, we decline to hold that his testimony before the grand jury . . . should be suppressed and the indictment dismissed because, although his attorney inquired, he was not warned that he was a target of the grand jury's investigation.Id. at 1056. Thus, Crocker's specific holding does not support Hawkins' position; rather, he is asking that this court follow through on Crocker's warning to federal prosecutors.
As the government points out, the Jacobs case, on which the warning in Crocker relied, is the only Circuit case to have ordered the dismissal of a perjury indictment for a prosecutor's failure to inform the witness of his target status. Moreover,Jacobs's persuasiveness is undermined for several reasons.
First, the Supreme Court had previously vacated and remandedJacobs in light of U.S. v. Mandujano, 425 U.S. 564 (1976) (holding that government was not required to give Miranda warnings to grand jury targets who testify before grand jury). On remand, the Second Circuit upheld its previous decision on the grounds that it was a "one-time sanction" enforced as part of the court's "supervisory powers" that was being employed "to encourage uniformity of practice" (of warning witnesses of their target status) between the Strike Force involved in the case and the U.S. Attorney's Office. Jacobs, 547 F.2d at 773. The court made it clear that it was acting "only on our supervisory power, exercised in a circumscribed manner involving the Strike Force," and that the opinion was "to have no prospective application as precedent for the District Courts on the constitutional issue."Id. at 775-76.
Second, after Crocker, in United States v. Tonelli, 577 F.2d 194 (3d Cir. 1978) (finding no constitutional right to receive special warnings before testifying before grand jury but vacating indictment because it was deficient), the Third Circuit was again asked to exercise its supervisory power to dismiss an indictment where the defendant did not receive a target warning. The Third Circuit refrained from doing so, on the grounds that the Justice Department had subsequently (on December 16, 1977) adopted its current policy of warning targets before a grand jury appearance and the sanction was thus unnecessary. Id. at 196. Hawkins provides no evidence that the U.S. Attorneys have a current practice of refusing to comply with this policy. Further, as discussed below, it is doubtful that the court could properly exercise such supervisory powers under current Supreme Court precedent.
Third, since Jacobs and Crocker, the Supreme Court has made it clear that although the federal courts have supervisory powers that "can be used to dismiss an indictment because of misconduct before the grand jury, at least where that misconduct amounts to a violation of one of those few, clear rules which were carefully drafted and approved by this Court and by Congress to ensure the integrity of the grand jury's functioning," the federal courts may not use this supervisory power "as a means of prescribing those standards of prosecutorial conduct in the first instance." U.S. v. Williams, 504 U.S. 36, 46-47 (1992). In Williams, the Court stated:
Because the grand jury is an institution separate from the courts, over whose functioning the courts do not preside, we think it clear that, as a general matter at least, no such 'supervisory' judicial authority exists.Id. at 47.
The Third Circuit addressed Williams in Baylson v. Disciplinary Board of the Supreme Court of Pennsylvania, 975 F.2d 102 (3d Cir. 1992), cert. denied (affirming district court holding that Pa. R. Prof. Conduct 3.10, requiring federal prosecutors to obtain prior judicial approval before serving grand jury subpoena on attorney, where attorney would be asked to testify about past or present clients, could not be enforced against federal prosecutors practicing before federal district courts in Pennsylvania), and in U.S. v. Gomez, 237 F.3d 238 (3d Cir. 2000) (affirming conviction and noting Supreme Court precedent and judicial reluctance to exercise supervisory powers over grand jury procedures).
In Gomez, the defendant argued that the court should exercise its "supervisory powers" to require the government to advise a witness before a grand jury of his right to remain silent. In refusing to do so, the Third Circuit discussed its reading ofWilliams, in a passage quoted at length in the government's brief:
We had occasion promptly to consider Williams in the grand jury supervisory power context in [ Baylson]. In Baylson, after discussing Williams and other Supreme Court cases, we indicated that Supreme Court precedent "suggest[s] to us that the district court may not under the guise of its supervisory power or its local rule-making power, impose the sort of substantive restraint on the grand jury that is contemplated" by a rule requiring a prosecutor to obtain prior judicial approval to subpoena an attorney before a grand jury where the prosecutor will seek to compel the attorney to provide evidence against his present or former client.Id. at 241.
While the defendant in Gomez was not a target of the investigation, id. at 242 n. 2, and Gomez thus does not address precisely the issue raised by Hawkins, Gomez and the opinions of all other circuit courts that have addressed the issue suggest that the Third Circuit would refuse to dismiss a perjury indictment on grounds such as those raised by Hawkins, and that any argument to the contrary, based on Jacobs, is misplaced. See Annotation, Effect of Federal Prosecutor's Failure to Warn Grand Jury Witness of Status as Target or Subject of Grand Jury Investigation upon Subsequent Prosecution of Witness for Perjury Based on Testimony Before Grand Jury, 89 A.L.R. Fed. 498 (collecting cases).
Moreover, the Second Circuit itself has made it clear that it genuinely intended Jacobs as a "one-time sanction" and has refused to dismiss perjury prosecutions when the defendant was not warned of his target status. See e.g., U.S. v. Valentine, 820 F.2d 565, 572 (2d Cir. 1987) (holding that district court properly declined to suppress grand jury testimony because defendant had no constitutional right to receive a target warning and was otherwise well advised of his constitutional and statutory rights but reversing conviction because prosecution knowingly used false evidence). In Valentine, the Second Circuit relied on United States v. Washington, 431 U.S. 181, 189 (1977) (reversing order suppressing respondent's testimony as witness before grand jury). In Washington, the Court noted that the respondent had received a complete statement of his rights against self-incrimination, had orally agreed to waive those rights, and had signed a form that set forth those rights indicating that he was waiving his rights. Thus, respondent's waiver of his right against self-incrimination was made knowingly, and any additional warnings about possible prosecution were unnecessary. The Court further stated:
It is firmly settled that the prospect of being indicted does not entitle a witness to commit perjury, and witnesses who are not grand jury targets are protected from compulsory self-incrimination to the same extent as those who are. Because target witness status neither enlarges nor diminishes the constitutional protection against compelled self-incrimination, potential defendant warnings add nothing of value to protection of Fifth Amendment rights.Id. at 189.
Similarly, regarding Defendant's Fifth Amendment claim, the government points out that Hawkins did not incriminate himself in his grand jury testimony. Instead, he denied all wrongdoing in the matter under investigation, and committed a separate crime of perjury in doing so. See U.S. v. Babb, 807 F.2d 272 (1st Cir. 1986) (affirming conviction and finding that defendant's perjury and subsequent conviction for that crime was not product of prosecutorial misconduct). The court in Babb explained, "[t]he privilege against self-incrimination bars compelled testimony as to past crimes; it does not shelter new perjury." Babb, 807 F.2d at 277 (quoting United States v. Chevoor, 526 F.2d 178, 181 (1st Cir. 1975), cert. denied, 452 U.S. 935 (1976)). Based on the weight of precedent, and the public policy requiring grand jury witnesses to testify truthfully, the court must deny Defendant Hawkins' Motion to Dismiss on these grounds.
C. Perjurious Nature of Particular Statements
Defendant Hawkins argues that Counts 37-40 must be dismissed because the particular statements do not constitute perjury as a matter of law. (Defendant's Memorandum in Support of Motion at 1-2).
With regard to Count 37, Hawkins argues that he was simply mistaken in stating that the check to Defendant Kemp had bounced. (Defendant's Memorandum at 7). Defendant argues that under controlling Third Circuit law, this honest mistake is not perjury as a matter of law. See United States v. Rose, 215 F.2d 617 (3d Cir. 1954) (holding uncorroborated oath of one witness was not enough to establish falsity of defendant's testimony).
Count 37 states:
In this testimony, LA-VAN HAWKINS represented that he wrote a check to COREY KEMP at the request of RONALD A. WHITE on or about March 10, 2002, as a wedding gift, with the expectation that WHITE would reimburse him for the check, and that the check did not clear. This testimony was false, as HAWKINS then and there well knew and believed, in that the check did clear, and the funds were given to KEMP by HAWKINS and WHITE with the intent to influence KEMP in his official conduct, and not for a wedding present to KEMP, who actually had been married nearly two years earlier on or about July 12, 2000.
In response, the government argues that Hawkins falsely testified that he intended to give the check as a wedding gift, not that he falsely testified that he had not intended to give the check to influence Kemp in his official conduct. (Government's Response at 34). At trial, the government must prove these false statement charges beyond a reasonable doubt. Whether defendant's statement was an honest mistake is an issue for the jury to decide based on the evidence presented at trial.
With regard to Count 38, Hawkins argues that the allegations are insufficient to support a perjury charge because the prosecutor did not specifically ask Hawkins about his purpose in leaving the check blank. Thus, the jury will be forced to rely on the implication of Hawkins' testimony rather than on the testimony itself. Hawkins contends that this implication alone is insufficient to support a perjury charge. (Defendant's Memorandum at 12) (citing United States v. Slawik, 548 F.2d 7584 (3d Cir. 1977) (reversing perjury conviction and holding that indictment failed to set forth precise falsehood alleged and factual basis of falsity with sufficient clarity).
Count 28 states:
In this testimony, LA-VAN HAWKINS stated that he did not knowingly write a check in or about September 2002 to COREY KEMP for $5,000, but rather gave RONALD A. WHITE a check with a blank payee line which HAWKINS believed WHITE intended to give to African-American newspapers; and that WHITE did not contemporaneously reimburse him for the check. This testimony of LA-VANHAWKINS, as he then and there well knew and believed, was false, in that HAWKINS gave the check to WHITE with the purpose of acting as a conduit in WHITE's payment of $5,000 to KEMP, and never had any purpose in giving this check regarding African-American newspapers.
The government responds that the grand jury alleged that "Hawkins testified falsely when he said he believed that the money was going to African-American newspapers, and that White was not paying for it." (Government's Response at 43). Thus, the indictment details the specific false statement alleged and the factual basis of its falsity. Of course, the government bears the burden of proving its case beyond a reasonable doubt and the jury, not the court, must decide whether defendant's statements constituted perjury.
With regard to Count 39, defendant argues that his testimony is too vague and ambiguous to support a perjury charge. (Defendant's Memorandum at 13). Further, Defendant argues that his testimony did not relate to the "material" issue of "Hawkins' role in a party held at HAWKINS' restaurant . . .". (Indictment at 125).
Count 39 states:
This testimony of LA-VAN HAWKINS, as he then and there well knew and believed, was false, in that HAWKINS arranged and attended the party in honor of JANICE RENEE KNIGHT and RONALD A. WHITE on or about April 4, 2003, which KEMP attended.
The government responds that Hawkins is charged with testifying falsely when he denied arranging and attending the party. (Government Response at 43). The government further argues that Hawkins confuses the requirement that the grand jury define the materiality of testimony with the separate requirement that the indictment specify the false testimony and explain why it is false. Id.
As required, the indictment states that Hawkins' role in the party was a matter material to the grand jury's investigation.See United States v. Slawik, 548 F.2d 75, 79 (3d Cir., 1977) (reversing conviction of three counts of making false declarations before grand jury). The Indictment also "sets forth the precise falsehood alleged and the factual basis of its falsity with sufficient clarity to permit a jury to determine its verity and to allow meaningful judicial review of the materiality of those falsehoods." United States v. Crocker, 568 F.2d 1049, 1057 (3d Cir., 1977) (citing Slawik, 548 F.2d at 84-85). Whether the specific statements alleged in Count 39 relating to Hawkins' role in arranging and attending the party constitute perjury is an issue left for the jury.
Finally, in regard to Count 40, Defendant Hawkins argues that he made no "specific" request for Kemp's attendance at the meeting with Kahn, as alleged in the Indictment. Therefore, his testimony, that he asked Defendant White to bring "somebody" to the meeting, did not constitute perjury. Defendant also argues that Count 40 is inconsistent with Count 24 of the Indictment, which alleges that Defendant Hawkins requested that an unnamed pension official, not necessarily Kemp, attend the meeting.
Count 40 charges:
In this testimony, LA-VAN HAWKINS stated that it was not necessary to his business discussion with Aslam Kahn that WHITE and KEMP attend the meeting, but rather HAWKINS simply arranged the attendance of WHITE and KEMP at Kahn's request because Kahn was interested in pursuing a separate matter involving investment in Philadelphia. This testimony of LA-VAN HAWKINS, as he then and there well knew and believed, was false, in that HAWKINS specifically asked WHITE to bring KEMP to the meeting to pretend that HAWKINS had access to City pension funds to pursue the transaction in which HAWKINS wished to engage with Kahn.
In response, the government points to Count 24 of the which states:
86. On or about May 6, 2003, HAWKINS telephoned WHITE and made arrangements for the New York meeting. In part, HAWKINS said, "don't forget, man, that we got that meeting set up for 2:00 on
Thursday." WHITE replied, "what meeting?" HAWKINS said, "the meeting that I told you that I needed you to have Corey at for my guy. [T]he deal that we buying, Chicago, Detroit, and that, and all my boy Corey want to talk about, you know is that, you know, I just need to keep this guy in the hole, so you know what I'm saying, I'm talking that we going to be getting 20 million."
Indictment, Paragraph 86 at 41.
Considering Count 24 in its entirety, Count 40 of the Indictment is not contradictory and sufficiently alleges what questions were asked and why the answers were false — all that is required. Once again, the jury must decide whether Defendant Hawkins' statements constituted perjury. Therefore, Defendant's Motion to Dismiss the Counts will be denied.
PRETRIAL ORDER NO. 8
AND NOW, this 29th day of October, 2004, concerning pretrial motions to dismiss filed by various defendants, based on the foregoing memorandum:
1. The Motions to Dismiss of Defendants Glenn K. Holck (Doc. No. 175), Stephen M. Umbrell (Doc. No. 175), Anthony C. Snell (Doc. No. 161) and La-Van Hawkins (Doc. No. 176), and all joinders in these motions, are DENIED.
2. The Motions of Defendant Charles LeCroy to Dismiss the Indictment (Doc. No. 172) and Strike Portions of the Indictment (Doc. No. 173) are DENIED.