Opinion
02 Cr. 101 (GEL).
June 24, 2003.
Deirdre A. McEvoy, Assistant United States Attorney, Southern District of New York (James B. Comey, United States Attorney, on the brief), for the United States.
Harvey Fishbein, Gould Fishbein Reimer Gottfried, LLP, New York, NY, for Defendant Frank Summa.
OPINION AND ORDER
Frank Summa is accused in a single-count indictment with attempting to sell "false and fictitious instruments that purported to be actual securities of the United States, in violation of 18 U.S.C. § 514. He moves for dismissal of the indictment and other relief. The motions will be denied, except to the limited extent described in Part III(1) below.
BACKGROUND
The indictment contains no details of the offense. However, the Government has stated that the charge is based on the facts set forth in the complaint that led to his arrest pursuant to a warrant. (G. Mem. 2-7.) Of course, the contents of the complaint are merely allegations, and they are set forth here not as established facts, but simply to provide context for the legal issues to be decided.
According to the complaint, Summa opened a brokerage account at a firm called Donald and Company in or about July 2001. Over the next several months, he attempted to deposit into the account instruments that purported to be United States Federal Reserve Notes in one hundred million dollar denominations, totaling twenty-five billion dollars, and another twenty-five billion dollars in purported United States Federal Reserve bonds, also in one hundred million dollar denominations. After satisfying themselves that the instruments were not authentic securities of the United States, members of the firm contacted the FBI.
In October 2001, an undercover agent contacted Summa. The undercover advised that he knew that Summa was trying to negotiate these securities. Representing that he had an investment banking client in need of capital, the agent sought one hundred million dollars in securities from Summa. Summa represented that he was the legitimate owner of fifty billion dollars in United States securities, and that he was willing to transfer one hundred million dollars of these securities for 10% of the face amount. Summa was willing to pay up to one million dollars to the undercover agent for his role in arranging the transaction, and stated that he did not want his name on any contract. At one point in the negotiations, the undercover informed Summa that he knew the securities were counterfeit, but would go ahead with the deal if his commission was increased to two million dollars. Summa insisted that the securities were genuine, but agreed to increase the commission as requested. He was then arrested.
DISCUSSION
I. Vagueness
Summa first argues that the indictment should be dismissed because the statute in question is unconstitutionally vague. (Mem. 1-7.) The argument is without merit.
A statute is unconstitutionally vague if it "fails to give adequate guidance to those who would be law-abiding, to advise defendants of the nature of the offense with which they are charged, or to guide courts in trying those who are accused."Musser v. Utah, 333 U.S. 95, 97 (1948). To be valid, a statute must give a "person of ordinary intelligence a reasonable opportunity to know what is prohibited." Grayned v. City of Rockford, 408 U.S. 104, 108 (1972).
Section 514(a)(2), which became law in 1996, provides in pertinent part:
Whoever, with intent to defraud, . . . passes, utters, presents, offers, brokers, issues, sells, or attempts or causes the same, or with like intent possesses, . . . any false or fictitious instrument, document, or other item appearing, representing, purporting, or contriving through scheme or artifice, to be an actual security or other financial instrument issued under the authority of the United States [or of certain other entities] shall be guilty of a class B felony.
The legislative history suggests that the statute was intended to close a perceived loophole in the counterfeiting laws. Senator D'Amato, who introduced the bill, apparently understood then-existing counterfeiting statutes to prohibit the uttering only of unauthorized versions of genuine banknotes or securities, but not of instruments that purported to be valid examples of entirely made-up or non-existent securities. In introducing the legislation Senator D'Amato decried the use of "factitious financial instruments" purporting to be securities such as "prime bank derivatives, . . . Indonesian promissory notes, [and] U.S. Treasury warrants" to defraud investors. Such "[f]ictitious financial instruments," he said, "are typically produced in very large denominations and purport to offer very high rates of return." He went on to state that "Because these fictitious instruments are not counterfeits of any existing negotiable instrument, Federal prosecutors have determined that the manufacture, possession or utterance of these instruments does not violate the counterfeit or bank fraud provisions" of the United States Code. He therefore proposed the bill that eventually became § 514, to prohibit the fraudulent use of such instruments. 141 Cong. Rec. S9533-34 (1995).
There is nothing whatever vague about the statute. It prohibits the use, "with intent to defraud," of phony financial instruments that purport to be actual securities issued under the authority of issuers including the United States. Nothing could be simpler. The conduct prohibited is the uttering of instruments that purport to be genuine obligations of (in this instance) the United States, but which are not. Contrary to Summa's claim (Mem. 6), the statute does not impose strict liability on those who innocently commit such an act. Rather, it has a scienter or mens rea element, "intent to defraud," which, as the Government correctly concedes (G. Mem. 15), inherently requires that the defendant have actual knowledge at the time he possessed and uttered the securities, that they were false and fictitious.
Summa's concern that "the ambiguous terminology of the statute creates an unacceptably high risk that the lawful activities of [citizens] will be criminalized" (Mem. 3) is groundless. He complains that "neither the statute nor the legislative history defines what is meant by a `false or fictitious' instrument" (Id. 2-3), but does not explain what about such simple English terms requires definition. Summa asks, "assuming a person comes into possession of an instrument that appears to be an actual security, through means that are not obviously unlawful, how does that person know that they are committing a federal offense by attempting to negotiate the instrument through the services of a professional, licensed, and legitimate broker?" (Mem. 5.) But this misstates both the terms of the statute and the nature of the vagueness inquiry. The person in Summa's hypothetical only violates the statute if he uses the document "with intent to defraud"; the statute is only vague if a "person of ordinary intelligence" would not understand what conduct is prohibited. As the Government points out, scienter elements have frequently been held to defeat vagueness challenges to statutes.See, e.g., United States v. Thompson, 76 F.3d 442, 452 (2d Cir. 1996); United States v. Schneiderman, 968 F.2d 1564, 1565 (2d Cir. 1992); United States v. Margiotta, 688 F.2d 108, 129 (2d Cir. 1982). Here, however, there is no vagueness for the scienter requirement to cure. Summa cannot plausibly argue that the statute leaves him puzzled about what kinds of documents he is prohibited from using to commit frauds — the statute is quite clear that it covers "false and fictitious" instruments that masquerade as "actual securit[ies] . . . issued under the authority of the United States."
Citing United States v. Pullman, 187 F.3d 816 (8th Cir. 1999), Summa argues that because the term "counterfeited" can apply to "a document that purports to be genuine but is not, because it has been falsely made or manufactured in its entirety," 18 U.S.C. § 513(c)(1), and can therefore apply to documents "made from scratch," 187 F.3d at 823, there was really no loophole for § 514 to close, leaving him puzzled about the precise application of the statute. (D. Mem. 3-4.) The argument fails. Statutes frequently overlap, and legislatures have been known from time to time to enact specific laws prohibiting conduct that already is unlawful under other, more general statutes. This lets legislators appear busy about the public good, and renders penal codes bulky and inelegant. But if the specific enactment is clear about what conduct it covers, as § 514 indisputably is, the fact that the conduct might already be covered under another law raises no issue of vagueness, at least about the more specific provision. Thus, whether or not Senator D'Amato was correct that Summa's conduct could not be prosecuted under some other statute, a question which need not be addressed here, is irrelevant to whether the present statute is vague.
Finally, the only appellate authority cited by either party that addresses a conviction under § 514(a) provides no support for Summa's argument. In United States v. Howick 263 F.3d 1056 (9th Cir. 2001), the court rejected a claim that the statute must be interpreted to include a requirement that the false security bear a sufficient likeness to a genuine instrument to deceive an honest unsuspecting individual, holding it enough if the security "appears to be `actual' in the sense that it bears a family resemblance to genuine financial instruments." Id. at 1067-68. The court noted that the statute served to protect victims "of a rather credulous nature" who might accept such "entirely unfamiliar" securities as those Senator D'Amato referred to. Id. at 1068. The court expressed no concern that the statute, so interpreted, would be vague, and affirmed the conviction.
Thus, the statute under which Summa was indicted is not vague, and the motion to dismiss the indictment is denied.
II. Suppression
Summa next moves to suppress evidence seized from him at the time of his arrest, and statements he made following the arrest, on the ground that the arrest was illegal. (Mem. 7-11.) Since the arrest was made pursuant to a warrant issued by a Magistrate Judge, whose finding of probable cause is entitled to substantial deference, United States v. Ventresca, 380 U.S. 102, 109 (1965), doubts should be resolved in favor of upholding the warrant's validity. United States v. Zucco 694 F.2d 44, 46 (2d Cir. 1982). Here, there are no doubts to resolve, and the motion will be denied.
Summa first argues that there was no probable cause because the charge on which the warrant was based is invalid, given the alleged vagueness of the underlying statute. Since the premise of that argument has already been rejected, it provides no basis for suppressing the evidence.
Summa's second argument is that the complaint omitted material facts that, if included, would have caused the magistrate not to find probable cause. This argument is also without merit.
Under Franks v. Delaware 438 U.S. 154 (1978), a defendant may challenge a search warrant "where the affidavit in support of the search warrant is alleged to contain deliberately or recklessly false or misleading information." United States v. Canfield, 212 F.3d 713, 717 (2d Cir. 2000). Here, Summa does not argue that any of the information set forth in the complaint was false at all, let alone recklessly so. That information amply supports the magistrate's conclusion that there was probable cause to believe that Summa deposited his securities with Donald and Company with intent to defraud. As is often true where state of mind is at issue, the evidence is circumstantial, but the evidence recited in the complaint — including the extraordinary amount of the securities, Summa's willingness to transfer them for a mere fraction of their face value, his reluctance to have his name appear on documents reflecting the transaction, and his agreement to pay a huge fee to the undercover to cash the securities, and to double the fee after the agent asserted that he knew they were invalid — would justify a reasonable person in inferring that Summa knew that the securities were false.
The Government points out that the Second Circuit has apparently never considered whether Franks applies to arrest warrants. (G. Mem. 21 n. 9.) It cites neither authority nor any reasoning supporting a possible distinction between search and arrest warrants, however, and recognizes that other circuits have so applied it. United States v. Colkley, 899 F.2d 297, 299-303 (4th Cir. 1990); United States v. Martin 615 F.2d 318, 327-29 (5th Cir. 1980). While the Government correctly states that the Government in those cases did not contest the point, it does not address the possibility that the absence of challenge results from the indisputability of the proposition. At any rate, the Government is content to "assume" that the Franks doctrine applies, so the Court will make the same assumption.
None of the various additional facts asserted by Summa would change this conclusion. The complaint makes clear that Summa continued to insist that the securities were genuine. The additional information he refers to might be relevant to a factfinder addressing the issue of scienter, and eventually may persuade such a factfinder to have a reasonable doubt about Summa's guilt. But facts that support an "innocent explanation" of the evidence alleged in the complaint "do not negate probable cause." United States v. Fama, 758 F.2d 834, 838 (2d Cir. 1985). None of the facts suggested by Summa significantly undermine the showing of probable cause made in the complaint, or constitute the kind of fact that a reasonable agent of integrity would have to include in a complaint in the interests of fairness.
Accordingly, the motion to suppress is denied.
III. Discovery
1. Defendant seeks advance disclosure of "similar act" evidence the Government intends to offer pursuant to Rule 404(b), Fed.R.Evid. The Government agrees to provide such evidence "in ample time for Summa to prepare for its introduction but in no event less than ten working days before trial." (G. Mem. 29.) The motion is thus granted to the extent of directing the Government to live up to that agreement. Absent a legitimate reason to risk a continuance by testing the limits of what constitutes "ample time for Summa to prepare" by withholding any such evidence in its possession, prudence would dictate providing it at the earliest opportunity.
2. Summa's motion for a bill of particulars is denied, in light of the Government's acknowledgment that the charge in the indictment is based on the incidents, and the specific false and fictitious securities, described in the complaint. (G. Mem. 31.) "Where the defendant has the necessary information from other sources, including discovery materials, the Government will not be compelled to provide particulars." United States v. Ahmad, 992 F. Supp. 682, 684 (S.D.N.Y. 1998).
3. The motion for disclosure of forensic test reports and expert witness testimony pursuant to Fed.R.Crim.P. 16(a)(1)(D) and (E) is denied as moot in light of the Government's response. (G. Mem. 32.)
4. The motion for pre-trial disclosure of exculpatory material is denied. United States v. Coppa, 267 F.3d 132 (2d Cir. 2001). As with Rule 404(b) evidence, the Government is reminded that early disclosure moots later arguments that the belated disclosure of Brady information prejudiced the defense.
CONCLUSION
For the reasons set out above, the motions are denied, except to the extent granted in Part III(1).
SO ORDERED.