Opinion
CRIMINAL ACTION NO. 1:06-CR-0172-02-TWT-CCH, (Superseding).
February 16, 2007
ORDER FOR SERVICE OF REPORT AND RECOMMENDATION
Attached is the Report and Recommendation of the United States Magistrate Judge in this action in accordance with 28 U.S.C. § 636(b)(1) and this Court's Criminal Local Rules 12.1(E) and 58.1(A)(3).
Pursuant to 28 U.S.C. § 636(b)(1), each party may file written objections, if any, to the Report and Recommendation within ten (10) days of service of this Order. Should objections be filed, they shall specify with particularity the alleged error or errors made (including reference by page number to the transcript if applicable) and shall be served upon the opposing party. The party filing objections will be responsible for obtaining and filing the transcript of any evidentiary hearing for review by the District Court. If no objections are filed, the Report and Recommendation may be adopted as the opinion and order of the District Court and any appellate review of factual findings will be limited to a plain error review. United States v. Slay, 714 F.2d 1093 (11th Cir. 1983).
The above-referenced ten (10) days allowed for objections, plus three days for mailing, is EXCLUDED from the computation of time under the Speedy Trial Act. 18 U.S.C. § 3161(h)(1)(F). The Clerk is directed to submit the Report and Recommendation with objections, if any, to the District Court after expiration of the above time period.
IT IS SO ORDERED
REPORT AND RECOMMENDATION ON MOTION TO DISMISS FOR FAILURE TO STATE OFFENSES [306]
Defendant is charged in the indictment with conspiracy (Count 1), bank loan application fraud (Counts 6-8, 10-13 and 16), mail fraud (Counts 23-26, 28-29 and 32), wire fraud (Counts 42-44, 46-48 and 51), and bank fraud (Counts 59-61, 63-66 and 69). This action is before the Court on Defendant's Motion to Dismiss the Indictment for Failure to State Offenses ("MTD") [306]. Defendant argues that the Superseding Indictment should be dismissed because it fails to allege sufficient facts to support a prima facie case against him. MTD at page 3.I. BACKGROUND
The Superseding Indictment in this case alleges that Defendant Bobo, along with fourteen co-Defendants, devised and executed a scheme to defraud mortgage companies and federally-insured banks. Superseding Indictment ("Indictment") [164] ¶ 2. According to the Indictment, Defendants obtained fraudulent appraisals of residential properties, inflating property values for the purpose of defrauding lenders. Defendant Bobo, a Certified Real Estate Appraiser, is alleged to have prepared and submitted nine of the 59 fraudulent property appraisals that were used to obtain loans at inflated values. Indictment ¶ 4.
II. DISCUSSION
Under the Sixth Amendment to the United States Constitution, a criminal indictment must be sufficiently definite as to "advise the defendant of the nature and cause of the accusation," so that he can both defend himself at trial and avoid double jeopardy in a later prosecution for the same offense. U.S. Const. amend. VI; Wong Tai v. United States, 273 U.S. 77, 80-81 (1927). Rule 7(c)(1) of the Federal Rules of Criminal Procedure further clarifies this standard, stating that an indictment must contain "a plain, concise and definite written statement of the essential facts constituting the offense charged." Fed.R.Crim.P. 7(c)(1).
In examining the validity of an indictment under the Sixth Amendment and Rule 7(c)(1), courts look to the "common sense construction" of the document on its face. See United States v. Critzer, 951 F.2d 306, 307 (11th Cir. 1992); United States v. Gold, 743 F.2d 800, 812 (11th Cir. 1984). To be valid, an indictment must contain both "the essential elements" of the offense charged and "the essential facts" constituting that offense. United States v. Fern, 155 F.3d 1318, 1324 (11th Cir. 1998) (internal citation omitted); Gold, 743 F.2d at 812. If an indictment contains both, it has sufficiently stated an offense and should not be dismissed on these grounds.
Defendant argues that the Superseding Indictment in this case is insufficient because it merely tracks the language of the underlying statutes Defendants allegedly violated, without offering "a statement of the facts and circumstances forming the bases for the charged specific offense." MTD at page 4. He argues that the conspiracy offense, as well as four of the underlying substantive offenses, must be dismissed for failure to state the essential facts supporting the offenses charged.
A. Conspiracy Offense
Defendant first argues that Count One — which charges conspiracy in violation of 18 U.S.C. § 371 — must be dismissed because the indictment alleges insufficient facts demonstrating he was knowingly involved in the conspiracy. MTD at page 5. Defendant also contends that knowing participation is an "essential element" of conspiracy, because one cannot be guilty of a conspiracy without having knowingly participated in it. He argues that Count One does not support this "knowing" element, and that, in turn, that count lacks "the essential facts" showing he intended to further the conspiracy. He argues that the conspiracy charge is therefore invalid as to him, and should be dismissed for failure to state the offense of conspiracy. Id.
The offense of conspiracy is committed when "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." 18 U.S.C. § 371.
As previously discussed, an indictment must contain both the essential elements and the essential facts supporting those elements in order to adequately state an offense. Fern, 155 F.3d at 1324; Gold, 743 F.2d at 812. With respect to the offense of conspiracy in violation of 18 U.S.C. § 371, a defendant's knowing involvement in it is an essential element. See United States v. Brenson, 104 F.3d 1267, 1281-82 (11th Cir. 1997) (outlining the three elements of conspiracy: (1) an agreement to do something illegal; (2) the defendant's "knowing and voluntary" involvement, and (3) an overt act that was committed in furtherance of the conspiracy); see also United States v. Blair, 54 F.3d 639, 642 (10th Cir. 1995) ("There can be no doubt . . . that conspiracy is a specific intent crime.").
There is a crucial distinction, however, between the facts alleged in the charging document and the evidence as it is likely to come forth at trial. At this stage, Defendant can only challenge the sufficiency of the Superseding Indictment on its face, not the evidence as it is likely to be presented at trial. See Critzer, 951 F.2d at 307; Gold, 743 F.2d at 812. Thus, the issue is not whether Defendant Bobo knew of the conspiracy, but whether the Government pled that and other essential facts.
The Indictment in this case states that Defendant Bobo was a Certified Real Estate Appraiser who prepared false appraisals for use in nine fraudulent real estate transactions. Indictment ¶ 1(e). Count One charges him with conspiracy, stating that he "did willfully, knowingly, and unlawfully . . . conspire . . . to commit certain offenses against the United States." Id. ¶ 2. Paragraph four of Count One, labeled "Overt Acts," provides details of Defendant Bobo's role in the scheme. Id. ¶ 4 (stating that Defendant Bobo, along with several other Certified Real Estate Appraisers, prepared and submitted "documents which contained false statements and reports and willfully overvalued land, property and security" in order to induce banks and other mortgage lenders to provide loans for artificially inflated property values). On its face, therefore, the Indictment sets forth the essential facts of the conspiracy with which Defendant is charged.
Defendant argues to the contrary, comparing his case to that of United States v. Bobo, 344 F.3d 1076 (11th Cir. 2003) (no relation to the case at bar). In that case, Dr. Philip Bobo was initially convicted of conspiracy to defraud a health care benefits program (count one) and attempt to defraud a health care benefits program (count two). Id. at 1085-86. Dr. Bobo was alleged to have bid for a contract with Alabama's state Medicaid agency, after inducing another potential bidder to refrain from bidding against him. Id. at 1979-82. The indictment against Dr. Bobo charged him, on the basis of these facts, with conspiring to "execute a scheme and artifice to defraud a health care benefit program" (count one) and "knowingly and willfully" executing that scheme (count two). Id. at 1083-84.
Although a jury convicted Dr. Bobo of counts one and two, the Eleventh Circuit vacated that conviction because the indictment was insufficiently specific. Id. at 1085-86. The Eleventh Circuit cited three problems. First, although Dr. Bobo was convicted under a statute prohibiting fraud "in connection with the delivery of or payment for health care benefits, items, or services," 18 U.S.C. § 1347, the indictment failed to mention how Dr. Bobo's fraud connected to "the delivery of or payment for" any of those things. Bobo, 344 F.3d at 1084. Second, the indictment did not specify what Dr. Bobo was defrauding the Medicaid program of (i.e., benefits, items, or services). Id. As the Eleventh Circuit put it, "the indictment [made] only a broad allegation of fraud in a health care benefit program without the required specificity." Id. And, as the Supreme Court has held, when an indictment calls for speculation as to one of the fundamental elements of a charge, the indictment is invalid. See Hamling v. United States, 418 U.S. 87, 117 (1974).
Thirdly, and perhaps most importantly, the Eleventh Circuit explained that the indictment against Dr. Bobo was insufficiently specific because it failed to identify what unlawful thing Dr. Bobo did. Bobo, 344 F.3d at 1084. Specifically, the indictment cited no federal or state law that required service contracts to be bid competitively, or that prohibited individuals from offering money to others in hopes of inducing them not to bid on a contract. Id. at 1084-85. In essence, the Eleventh Circuit dismissed the indictment because, on its face, it failed to explain how the acts Dr. Bobo allegedly committed were unlawful under the cited statute.
Count One of the Superseding Indictment in the case at bar, however, is not comparable to the indictment against Dr. Bobo. In Bobo, the defendant's conviction was overturned because the indictment failed to allege facts that would give rise to liability for a conspiracy to defraud the United States; essentially, it was unclear what Dr. Bobo had done that was unlawful. In the present case, the Indictment not only alleges that Defendant knowingly participated in the described conspiracy, but also explains Defendant's role in the scheme and facts indicating that he knew his actions were in furtherance of the scheme to defraud lenders.
Defendant nevertheless argues that the "knowing" element of a conspiracy charge is unclear in the Indictment; that is, that the Indictment does not offer facts that show Defendant knew he was participating in a conspiracy when he allegedly prepared fraudulent appraisals. MTD at pages 5-7. While knowing participation is an element of any conspiracy charge under 18 U.S.C. § 371, however, an indictment need not detail the evidence the Government intends to introduce at trial to prove that a defendant knew he was participating in a conspiracy to commit a crime. It must only set forth "the essential facts constituting the offense charged." Fed.R.Crim.P. 7(c)(1). The Indictment's allegation that Defendant prepared the nine specific "fraudulent appraisals" as part of a scheme to defraud lenders does that. Further, even if he was not personally aware of all aspects of the overall conspiracy, this allegation alone is sufficient to indicate that Defendant was involved in the conspiracy to defraud lenders-whether it is sufficient to prove him guilty beyond a reasonable doubt is not to be decided at this time. See United States v. Guerra, 293 F.3d 1279, 1285 (11th Cir. 2002) ("A defendant may be found guilty of conspiracy if the evidence demonstrates that he knew the `essential objective' of the conspiracy, even if he did not know all its details or played only a minor role in the overall scheme.") (internal citation omitted).
See discussion, supra pages 4-5.
In sum, the Court finds that the Indictment states the necessary elements of conspiracy and details sufficient facts to support them, and Defendant identifies no authority that would suggest otherwise. Having met the Sixth Amendment and Rule 7(c)(1) requirements, Count One should not be dismissed.
B. Substantive Offenses
Defendant next argues that the four substantive charges against him (bank loan application fraud, mail fraud, wire fraud and bank fraud) must be dismissed because they inadequately state the essential facts concerning him that support the charge of those offenses. MTD at page 9. Defendant essentially raises three objections to the substantive charges. First, he objects that the Indictment lacks sufficient facts to support the element of "falsity" that is required in all four offenses. Second, he argues that the substantive counts impermissibly cross-reference facts alleged in Count One. Finally, Defendant contends that the charging language of the substantive counts merely tracks the language of the cited statutes, without adding the necessary facts specifying how Defendant violated those statutes. The Court addresses each of these contentions in turn.
Defendant first objects that the Indictment does not adequately specify what act he performed to satisfy the element of falsity common to all four charges. MTD at page 9. As previously discussed, an indictment sufficiently states offenses if it identifies the "essential elements" and "essential facts" that constitute those offenses. Fed.R.Crim.P. 7(c)(1); Fern, 155 F.3d at 1324; Gold, 743 F.2d at 812. Contrary to Defendant's assertions, the Court finds that the four substantive counts in the Indictment in which Defendant is charged all include both the necessary allegations of falsity and the essential facts underlying that element.
Bank loan application fraud under 18 U.S.C. § 1014 requires a "false statement or report" or the willful overvaluation of property. Mail fraud under 18 U.S.C. § 1341, wire fraud under 18 U.S.C. § 1343, and bank fraud under 18 U.S.C. § 1344 all require a "scheme to defraud" or a scheme to obtain money by "false or fraudulent pretenses."
As its element of "falsity," the bank loan application fraud charge requires that Defendant either knowingly made "a false statement or report," or willfully overvalued land, property or security. 18 U.S.C. § 1014. In support of this element, paragraph 5 of the bank loan application fraud charge states that Defendant prepared and submitted "documents which contained false statements and reports and willfully overvalued land, property and security." The charge goes on to provide details, listing each fraudulent property appraisal that Bobo personally performed in furtherance of the "falsity" element. Indictment ¶ 5. On the basis of this language in the charge itself, the Court finds that the bank loan application fraud charge adequately alleges not only the element of falsity, but the "essential facts" supporting that element.
The Court also finds that the "falsity" element is satisfied for the mail fraud, wire fraud, and bank fraud charges. Each of those charges requires that Defendant devise or execute a "scheme to defraud." See 18 U.S.C. § 1341 ("[w]hoever, having devised or intending to devise any scheme or artifice to defraud"); 18 U.S.C. § 1343 ("[w]hoever, having devised or intending to devise any scheme or artifice to defraud"); 18 U.S.C. § 1344 ("[w]hoever knowingly executes, or attempts to execute, a scheme or artifice to defraud a financial institution"). In support of this "scheme to defraud" element, these three substantive charges allege that Defendant intended to obtain money by false pretenses, and then cross-reference Count One of the Indictment, which lists nine fraudulent property appraisals that Defendant Bobo allegedly prepared. See Indictment ¶¶ 7, 10, 13. The Court finds that by asserting both the element of fraud and identifying Defendant Bobo's acts in furtherance of that fraud, the three substantive counts of mail fraud, wire fraud, and bank fraud adequately allege both the element of falsity and the "essential facts" supporting it.
While Defendant contends that all of the four substantive counts he discusses incorporate Count One by reference, he is wrong. In fact, only the mail fraud, wire fraud, and bank fraud charges cross-reference Count One. Referencing Count One allows those counts to rely on the description of Defendants' "scheme to defraud," discussed at length in Count One, without reiterating all the applicable facts. The bank loan application fraud charge (Counts Two through 18) does not reference Count One, however, as bank loan application fraud requires no "scheme to defraud."
Defendant acknowledges that the Indictment lists the properties for which he allegedly prepared inflated appraisals, but contends that this is insufficient because the Government does not provide the actual monetary discrepancies between each property's actual value and the inflated value given to it by Defendant Bobo. MTD at page 9. Defendant cites no authority, however, stating that an indictment must detail the actual monetary discrepancies alleged to exist. Absent such authority, the Court declines to conclude that the Indictment's otherwise-adequate explanation of "falsity" is insufficient.
Next, Defendant contends that the facts supporting the Indictment's substantive charges are insufficient because the substantive counts incorporate by reference many of the facts alleged in Count One, rather than state the facts separately. MTD at pages 9-10. He notes that all four of the substantive charges-bank loan application fraud, mail fraud, wire fraud and bank fraud-require some falsity or fraud as an element of the offense, and that in support of this element, the substantive counts "reallege and reincorporate" the facts stated in Count One. See, e.g., Indictment ¶ 7 ("The scheme and artifice to defraud and to obtain money by means of materially false and fraudulent representations and promises is more particularly described in [Count One] of this Indictment, and the Grand Jury realleges and incorporates those paragraphs as if fully set forth herein."). Defendant objects that this incorporation, for the purpose of satisfying the falsity or fraud element of the substantive offenses, is impermissible. MTD at page 9. He argues, in part, that the facts in Count One are insufficient to describe "the essential facts" of each substantive count's fraud element. Id.
While Defendant implies that all four of the substantive counts at issue incorporate Count One, Counts 2 through 18 (bank loan application fraud) do not incorporate any external allegations. Only Counts 19 through 37 (mail fraud), Counts 38-54 (wire fraud), and Counts 55-71 (bank fraud) incorporate Count One by reference.
There is no merit in Defendant's argument. Incorporation by reference is explicitly permitted by Rule 7(c)(1) of the Federal Rules of Criminal Procedure: "A count may incorporate by reference an allegation made in another count." Fed.R.Crim.P. 7(c)(1). Thus, the mere incorporation by reference of allegations elsewhere in the Indictment does not render the substantive counts invalid. Further, contrary to Defendant's contention, Count One provides the necessary "essential facts" to support each substantive count's fraud element. In particular, Count One explains the scheme to defraud mortgage companies, including each Defendant's role in the scheme. Count One also identifies Defendant Bobo as the Certified Real Estate Appraiser who inflated property values on nine appraisals he prepared in furtherance of the scheme. See Indictment ¶¶ 2, 4(a).
Defendant again relies on the Eleventh Circuit's opinion in Bobo, in which that court dismissed Dr. Bobo's conviction on the grounds that it did not clarify how Dr. Bobo's acts were unlawful. Bobo, 344 F.3d at 1084. Defendant argues that because the Eleventh Circuit did not permit cross-referencing in that case, this Court should dismiss the Indictment on the grounds that the substantive counts use cross-referencing in this case. MTD at page 10.
The Eleventh Circuit's reasoning in Bobo, however, is distinguishable from the case at bar. In that case, the court found the substantive charge against Dr. Bobo impermissibly referenced the conspiracy charge because the overt acts listed in the conspiracy charge failed to show how Dr. Bobo's conspiracy was in furtherance of an illegal objective. Bobo, 344 F.3d at 1085. In this case, however, the Court has already concluded that the conspiracy charge in Count One adequately explains the illegality of the conspiracy's objective (namely, that the false appraisals were prepared and submitted with the intent of defrauding lenders). See discussion, supra pages 8-9.
Without acknowledging the factual differences, Defendant selects language from Bobo to urge a similar result in this case. Because of those factual differences, however, counsel's reliance on Bobo is misplaced. Here, the Court finds that the references supporting the substantive counts adequately establish the facts in support of the fraud element common to all offenses.
Defendant also argues that the cross-referencing is inappropriate because the referenced paragraphs (paragraphs 1 through 4) include criminal acts that Defendant did not personally perform. Thus, he contends, it is improper to reference the acts of the other Defendants in order to establish the fraud element of his own substantive charges. Reply to Government's Response to Defendant's Motion to Dismiss the Indictment for Failure to State Offenses ("Reply Br.") [395] at page 2.
While the four referenced paragraphs include fraudulent appraisals performed by individuals other than Defendant Bobo, they also include nine appraisals that Defendant Bobo allegedly prepared. The Court finds that, broken down into individual acts, the referenced paragraphs allege sufficient facts to describe the essential facts of Defendant Bobo's alleged fraud. Further, taken as a whole, the paragraphs pled the existence of an overarching scheme to defraud in which many individuals, including Defendant Bobo, were involved. That he did not participate in each alleged attempt to defraud is not relevant. See Guerra, 293 F.3d at 1285. The Court thus finds that the cross-reference to Count One is appropriate to establish Defendant Bobo's personal involvement and that the cross-reference cites facts sufficient to support the fraud element of the substantive charges.
Defendant's last objection to the substantive counts is that they impermissibly track the language of the statutes cited, without providing adequate facts identifying how he allegedly violated those statutes. MTD at pages 8-9. In support of this contention, Defendant cites United States v. Hess, in which the Supreme Court held that the indictment did not sufficiently describe the statutory offense because it cited the language of the statute but did not accompany that statutory language with "such a statement of the facts and circumstances as will inform the accused of the specific offence . . . with which he [was] charged." Hess, 124 U.S. 483, 487 (1888); see MTD at pages 12-14.
Again, the facts in the cited case are distinguishable from the case at bar. In Hess, the defendant was indicted for larceny, but the indictment against him stated only that the defendant, "having devised a scheme to defraud divers [sic] other persons to the jurors unknown, intended to effect the same by inciting such other persons to communicate with him through the post-office, and received a letter on the subject." Hess, 124 U.S. at 486 (internal quotations omitted). The Supreme Court found that the indictment was defective because it lacked particulars, such as what property was stolen or who it was stolen from. Id.
Here, however, the indictment's substantive offenses do not merely borrow from the statutory language, but go on to provide specific details. For example, while the bank loan application fraud charge tracks the language of 18 U.S.C. § 1014 by stating that Defendants "willfully overvalued land, property and security for the purpose of influencing the action of the financial institutions as specified," it continues by providing the addresses of the subject properties and the names of the individuals involved in each transaction. Indictment ¶ 5. In particular, the charge identifies eight appraisals prepared by Defendant Bobo and then describes the specifics of each fraudulent transaction. See id.
While Defendant argues that the Indictment does not give "extensive detail and description" about his alleged illegal acts, as the Government contends it does, this is immaterial. See Government's Response to Defendant's Motion to Dismiss the Indictment for Failure to State Offenses ("Response Br.") [381] at page 4; Reply Br. at pages 4-5. An indictment need not give extensive details in order to be valid under the Sixth Amendment and Rule 7(c)(1); it must only allege the "essential elements" of each charged offense and the "essential facts" demonstrating those elements. See Fern, 155 F.3d at 1324; Gold, 743 F.2d at 812.
In sum, the Indictment alleges that the element of falsity was present in Defendants' scheme, and it delineates Defendant Bobo's actions demonstrating this element. The Indictment's cross-references to Count One are permissible, and the Indictment contains adequate details explaining how Defendant's actions violated the cited statute. The Court thus finds that the Indictment contains, as required, both "the essential elements" of the substantive offenses and "the essential facts" constituting those offenses. For these reasons, the Court declines to dismiss the Indictment on the grounds of failure to state an offense.
III. RECOMMENDATION
IT IS SO RECOMMENDED.
RECOMMENDS DENIED.