Opinion
Criminal Action No. 03-CR-0414.
January 6, 2005
MEMORANDUM AND ORDER
AND NOW, on this 6th day of January, 2005, presently before the Court is the Motion to Dismiss Counts One as Duplicitous filed by Defendant Gene Bortnick on December 30, 2004 (Doc. No. 163). For the reasons that follow, Defendant's Motion is DENIED.
Count One of the Third Superceding Indictment charges Defendant with bank fraud in violation of 18 U.S.C. § 1344, which states:
Whoever knowingly executes, or attempts to execute, a scheme or artifice:
(1) to defraud a financial institution; or
(2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises; shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
Duplicity is the improper joining of distinct and separate offenses in a single count. U.S. v. Haddy, 134 F.3d 542, 548 (3d Cir. 1998) (citingUnited States v. Starks, 515 F.2d 112, 116 (3d Cir. 1975)). In order to determine whether a count in the indictment is duplicitous, a court must determine the "allowable unit of prosecution." Haddy, 134 F.3d at 548 (citing United States v. Arnick, 439 F.3d 351, 359 (7th Cir. 1971). The proper unit of prosecution for the bank fraud statute is an execution of a fraudulent scheme or artifice. See United States v. Schwartz, 899 F.2d 243, 248 (3d Cir. 1990).
First, Defendant claims that Count One impermissibly charges him with defrauding two different financial institutions. In support for this contention, Defendant cites United States v. Hinton, 127 F. Supp. 2d 548 (D.N.J. 2000) a case in which the District of New Jersey found a count of bank fraud duplicitious, as it charged defendant with defrauding sixseparate financial institutions. Id. at 556. The instant case is easily distinguished from Hinton, as the Third Superceding Indictment clearly describes how Congress Financial Corporation's operations, particularly its loan practices, are almost wholly determined by its parent, First Union National Bank. Given the interrelatedness of the two entities described in Count One, the Court finds that Count One is not impermissibly duplicitous on this ground.
Second, Defendant claims that Count One impermissibly charges him with submitting "multiple false inventory report certifications," which deprives him of the ability to identify which report serves as the basis for the bank fraud charge. The Government argues that each of the inventory report certifications are part of one execution of an overall scheme to defraud Congress Financial of $22 million that began in September of 1998, when Defendant signed the Loan and Security Agreement.
The Court finds two Third Circuit cases to be particularly instructive in resolving whether the Third Superceding Indictment properly charges one count of bank fraud based on multiple inventory reports. In United States v. Schwartz, 899 F.2d 243 (3d Cir. 1990), the defendant appealed his conviction on two counts of bank fraud in violation of 18 U.S.C. § 1344, claiming that each count incorrectly charged him with a single fraudulent deposit, rather than collapsing both deposits into one count alleging one overarching scheme. The Third Circuit rejected this argument, finding that "each deposit was a separate violation of 18 U.S.C. § 1344(a)(1), because in making each deposit Schwartz was executing his scheme to defraud" the bank. Id. at 248. In so finding, the Third Circuit cited a Ninth Circuit case holding that § 1344(a)(1) "plainly and unambiguously allows charging each execution of the scheme to defraud as a separate charge." Id. (citing United States v. Poliak, 823 D.2d 371, 372 (9th Cir. 1987).
Though this might seem to mandate the dismissal of this indictment for duplicity, the Court finds that the holding in Schwartz does not prevent the Government from charging an overall scheme to defraud in one count. Both the Third and the Ninth Circuit use permissive language in phrasing their holdings in Schwartz and Poliak with regard to the unit of prosecution for § 1344. Moreover, the Third Circuit has expressed its reluctance to employ a "one size fits all" approach to determining the appropriate way to phrase indictments. In United States v. Haddy, 134 F.3d 542 (3d Cir. 1998), the Third Circuit addressed a challenge to an indictment based on § 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, a statute that speaks to the use of deceptive devices to defraud. In that case, the Third Circuit held that the discrete steps in the deceptive scheme did not have to be charged in separate counts, as they were all part of one overarching securities trading scheme. The Court noted that other Circuits have approved the notion that some statutory offenses allow the prosecution to charge one count of an overall scheme to defraud, or several counts of "something less." Id. at 549. While the Third Circuit explicitly embraced charging several counts of "something less" under the bank fraud statute in Schwartz, this Court believes that it would also sanction the charging of one overall scheme to defraud under § 1344, as the Government has done in this case. As such, the Court finds that, though the term "multiple false inventory report certifications" might initially raise a question of duplicity, the Third Superceding Indictment properly charges Defendant with a single count of bank fraud.
In its November 29, 2004 Order denying Defendant's previous motion to strike other language from the indictment as duplicitous (Doc. No. 116), the Court stated that it "believes that an appropriately worded jury instruction will cure any potential prejudice to Mr. Bortnick that might result from having several different factual bases upon which a jury could convict or acquit Mr. Bortnick." The Court believes this to be true for Defendant's concerns as to determining which inventory certifications, if any, the jury finds to be fraudulent as part of a verdict on Count One. As it previously stated, the Court will rule on an appropriate jury instruction upon submission of proposed instructions by the parties at trial.
Third, Defendant claims that Count One also contains an array of irrelevant information that is unrelated to the bank fraud charge. The Court addressed this same argument in its Orders of October 29, 2004 (Doc. No. 118) and January 4, 2005 (Doc. No. 169), which denied Defendant's Motions to Strike Surplusage. As it stated in those Orders, the Court does not find the language cited by Defendant to warrant a change in the Indictment, much less its dismissal.