Based on your readings, analyze the court cases, include the following in your discussion:
Identify, discuss, and provide specific examples of the legal aspects of the fraud committed in each case.
Identify, discuss, and provide specific examples of any legal aspects that a fraud examiner must consider in each case with respect to the evidence.
Provide specific examples of what these 2 cases have in common and what is unique to the way each case was settled depending on whether it was tried in civil or criminal court.
FEDERAL CASES – CIVIL CASE
173 F.Supp.3d 44
United States District Court, S.D. New York.
Gigi JORDAN, Petitioner,
DEPARTMENT OF JUSTICE, Federal Bureau of Investigation, United States Department of Health and Human Services, and the Attorney General of the United States, Respondents.
No. 15-CV-1028 (RA)
Signed March 29, 2016
Background:Plaintiff brought action under the Crime Victims’ Rights Act (VARA) against the Department of Justice (DOJ), the United States Attorney General, and other government officials, alleging that she was a victim of federal crimes perpetrated by her former husband. Defendants moved to dismiss.
Holdings:The District Court,
, J., held that:
plaintiff was allegedly a victim of purportedfinancialfraudcrimes under the CVRA;
government fulfilled all of its CVRA obligations to plaintiff;
plaintiff was not entitled to documents or other information about government’s investigation under the CVRA; and
plaintiff did not qualify as alleged victim of purported healthcarefraudcrimes, under the CVRA.
Attorneys and Law Firms
Allan Laurence Brenner, Sole Practitioner, Long Beach, NY, for Petitioner.
John Dalton Clopper,Brandon Herbert Cowart, U.S. Attorney’s Office, New York, NY, for Respondents.
OPINION & ORDER
RONNIE ABRAMS, United States District Judge.
Petitioner Gigi Jordan brings this Petition to enforce her rights under the Crime Victims’ Rights Act (“CVRA”),18 U.S.C. § 3771, alleging that she is a victim of federal crimes perpetrated by her former husband. Respondents the Department of Justice (“DOJ”), the Federal Bureau of Investigation (“FBI”), the United States Department of Health and Human Services (“HHS”), and the Attorney General of the United States (collectively, the “Government”) move to dismiss the Petition, arguing that Jordan is not entitled to any remedies under the CVRA. Because the Government has already provided Jordan all the CVRA rights to which she is presently entitled, the motion is granted.
Jordan asserts that, between 1991 and the present, she “was the victim of a massive, far reaching scheme offraud, forgery, conversion, threats and intimidation engineered by Raymond A. Mirra, Jr.,” her former husband. Pet. ¶ 1. She alleges that “Mirra, and others at his direction, used over190 documents forged with Jordan’s signaturein the commission of multiple acts of bank, mail and wirefraud.”Id.¶ 6 (emphasis in original). The details of Mirra’s alleged schemes are set forth both in the Petition and a civil complaint currently pending in the District of Delaware, which is “incorporated [in the Petition] by reference.”
Id.¶ 7 & Ex. A (Compl.,
The Hawk Mountain LLC v. Raymond A Mirra, Jr., No. 13–CV–2083 (SLR), 2014 WL 3533911 (D.Del. Jul. 9, 2014)(“Ex. A”)). These filings allege that Mirra, among other things, opened fraudulent brokerage accounts, initiated illegal wire transfers, stole real property, and unlawfully profited from the sale of Jordan’s company to a corporation Mirra runs.See, e.g., Ex. A ¶¶ 59, 69, 225, 317. She further alleges that between 2008 and 2010, Mirra “engaged in a series of acts of harassment, intimidation and coercion of Jordan, as well as direct threats to her life … designed to prevent Jordan from discovering the conversion of her assets, asserting her rights to the assets, and to deter her from reporting Mirra’sfinancialwrongdoing to law enforcement authorities.” Pet. ¶ 10.
In addition to those acts “directly victimiz[ing her],”id.at 3, Jordan alleges that “beginning in or about 1994,” Mirra “embarked upon a multi-tiered plan” to perpetuate several healthcarefrauds,id.¶ 11, including “black-marketing HIV/AIDS drugs, drug diversion, money laundering and Medicaidfraudschemes,”id.¶ 85. She asserts that “the monies expended, invested and otherwise utilized by Mirra and the enterprise, in the criminal transactions involving [the healthcare companies] were in whole or in significant part the proceeds of thefraudand conversion of Jordan’s rightful assets,”id.¶ 35, and that the illegal proceeds were laundered through new accounts opened in her name without her knowledge,id.¶ 9.
Jordan alleges that in 2011 “an attorney acting on Jordan’s behalf, arranged to meet with [an Assistant United States Attorney (“AUSA”) from the U.S. Attorney’s Office for the Southern District of New York (“SDNY”) ] … to discuss the vastfinancialfraudconducted against Jordan by Mirra.”Id.¶ 36. Jordan claims that prior to the meeting, she discussed thesefraudsover the phone with the FBI, “provid[ing] overwhelming information to support that Mirra was operating a complex criminal enterprise.”Id.¶ 38. She also asserts that she “sent extensive documentation to [the AUSA] that detailed the enterprise’s fraudulentfinancialactivity.”Id.¶ 39. In May 2011, Jordan’s attorney met with the SDNY AUSA “in an hour-long meeting” during which the attorney “provided everything law enforcement would need in an investigation related to Mirra and his associates[ ].”Id.The lawyer also provided the evidence to another SDNY AUSA.Id.¶¶ 47-48. Jordan asserts that, despite the SDNY AUSA’s alleged initial “interest in the matter,”id.¶ 40, “[n]either Jordan nor her attorneys were ever informed of the status or progress of any investigation in the Southern District of New York,”id.¶ 48.
Jordan also alleges that she twice “sent the documentary materials to law enforcement in … Pennsylvania,” including several FBI agents and three AUSAs from the U.S. Attorney’s Office for the Eastern District of Pennsylvania (“EDPA”).Id.¶¶ 44, 49. Although prosecutors did not initially respond, Jordan eventually received a phone call from the EDPA’s “First Ass[istant] US Attorney Louis Lappen … responding to [her] voicemail message.”Id.¶ 50. happen allegedly asked that the materials be resent and “was apologetic saying he was going to look into why no one had responded to the documents sent and said he would be referring this to … the (then) Chief of their Criminal Division.”Id.After this phone call, “[n]either Jordan nor her attorneys were ever informed of the status or progress of any investigation in the Eastern District of Pennsylvania.”Id.¶ 51.
In late 2011, Jordan contacted HHS’s Office of Inspector General, which led to two meetings with HHS officials and FBI
agents in December 2011 and June 2012.Id.¶¶ 53, 55-58. She alleges that, during these meetings, “[t]he targeted specificity and scope of their questions was entirely consistent with the notion that these matters were being investigated as potential criminal RICO violations, with Mirra as the enterprise’s focal point.”Id.¶ 54. Throughout this period, Jordan’s attorneys and federal law enforcement remained in contact by email.Id.¶¶ 53-60. Following the meetings, Jordan asked to speak with prosecutors working on these cases from the SDNY.Id.¶¶ 61, 63. She alleges that she was denied the opportunity to do so because “the District Attorney of New York, the agency prosecuting Jordan for charges unrelated to the Mirra investigation[,] … requested that there be no face-to-face meeting between Jordan and federal prosecutors.”Id.¶¶ 68, 71.2
On July 17, 2012, the SDNY held a press conference to announce “a complaint… alleging a massive Medicaidfraudinvolving a black market in HIV/AIDS drugs.”Id.¶ 28. Jordan asserts that although “Mirra does not appear as a defendant in any of the pending indictments, nor is he mentioned by name in the body of any of the complaints, indictments or superseding indictments[, by] virtue of his long-standing status as principle of [some of the healthcare companies under investigation], he had to have been either a person of interest, a subject or a target of this wide-ranging multi-agency investigation.”Id.¶ 33. According to Jordan, Mirra’s “omission from any existing indictments bespeaks a wider, ongoing investigation with the context of a potential RICO prosecution,”id.¶ 34, and “[t]he [existing] indictment is predicated on criminal acts, including among other things, mailfraudand wirefraud, which usually lay at the heart of a typical RICO investigation and or prosecution,”id.¶ 32. Jordan alleges that while she requested meetings with prosecutors after the indictment was filed, the Government refused her requests.See id.¶¶ 63, 71-72.
After Jordan filed the instant action to enforce the rights she claims were denied to her under the CVRA, the Government moved to dismiss. On March 24, 2016, the Court held oral argument.
STANDARD OF REVIEW
2In reviewing a motion to dismiss, the Court must accept all factual allegations in the petition as true and draw all reasonable inferences in the plaintiff’s favor.
Forest Park Pictures v. Universal Television Network, Inc., 683 F.3d 424, 429 (2d Cir.2012). To survive a motion to dismiss, however, a petition “ ‘must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ”
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)(quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
This standard demands “more than a sheer possibility that a defendant has acted unlawfully.”
“ ‘Plausibility … depends on a host of considerations: the full factual picture presented by the complaint, the particular cause of action and its elements, and the existence of alternative explanations so obvious that they render plaintiff’s inferences unreasonable.’ ”
Fink v. Time Warner Cable, 714 F.3d 739, 741 (2d Cir.2013)(quoting
L–7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 430 (2d Cir.2011)).
3Enacted in 2004, the CVRA guarantees victims of federal crimes an array of substantive and participatory rights.See
In re Rendon Galvis, 564 F.3d 170, 174 (2d Cir.2009). The statute was enacted to correct a criminal justice system that, as Senator Dianne Feinstein put it, had become “out of balance—while criminal defendants have an array of rights under law, crime victims have few meaningful rights.”150 Cong. Rec. S4260-01(daily ed. Apr. 22, 2004). While cautioning that “[n]othing in this chapter shall be construed to impair the prosecutorial discretion of the Attorney General or any officer under his direction,”18 U.S.C. § 3771(d)(6), Congress passed the CVRA to ensure that actors in the criminal justice system “care about both the rights of accused and the rights of victims,”150 Cong. Rec. S4260-01(daily ed. Apr. 22, 2004) (statement of Sen. Feinstein). To that end, the statute entitles victims—defined as those “directly and proximately harmed as a result of the commission of a Federal offense”—to ten rights that apply at various stages of a criminal prosecution. 18 U.S.C. § 3773(e)(2)(A). Jordan invokes four of those rights: (1) “The reasonable right to confer with the attorney for the Government in the case”; (2) “The right to proceedings free from unreasonable delay”; (3) “The right to be treated with fairness and with respect for the victim’s dignity and privacy”; and (4) “The right to be informed in a timely manner of any plea bargain or deferred prosecution agreement.”18 U.S.C. § 3771(a)(5),(a)(7)-(9); Pet. at 3; Oral Arg. Tr. 41:21-23.
Jordan alleges that she was a victim of two distinct categories of federal crimes that entitle her to CVRA remedies. First, the Petition alleges that “Mirra directly victimized Jordan through a series of federal criminal offenses, including but not limited to mailfraud, wirefraud, money laundering, and racketeering,” Pet. at 3, as well as “forgery, conversion, threats and intimidation,”id.¶ 1 (the “FinancialFrauds”). In short, Jordan alleges that Mirra took large amounts of money from her banking and brokerage accounts without her knowledge or permission.Seeid.at 3–4. She asserts that she is a “direct” victim of theFinancialFraudsbecause they were perpetrated directly—and exclusively—against her.See id.Second, the Petition alleges that “[i]n addition, Mirra was at the forefront of a criminal enterprise which engaged in a massive scheme of healthcarefraud,”id.at 3, which included “black-marketing HIV/AIDS drugs, drug diversion, money laundering and Medicaidfraudschemes,”id.¶ 85 (the “HealthcareFrauds”). Jordan alleges that, for the HealthcareFrauds, she is a victim because her “divested assets were used for …financing” thefrauds,id.at 3, and the illicit proceeds were laundered through new bank accounts that Mirra opened in her name,id.¶ 9. Finally, in the event the Court does not grant Jordan CVRA remedies for theFinancialor HealthcareFrauds, the Petition asserts an alternative theory that combines the two categories of offenses. Under this theory, Mirra’s alleged criminal actions, when examined together, constitute a criminal conspiracy under the Racketeering Influenced and Corrupt Organizations Act (“RICO”),18 U.S.C. §§ 1961et seq.
See, e.g., Pet. ¶¶ 33-35. Jordan argues that both theFinancialFraudsperpetrated directly against her and the illegal HealthcareFraudsare predicate acts of this larger RICO enterprise.
Even assuming the facts alleged in the Petition to be true, each of Jordan’s claims must fail. Jordan, who has already had the
opportunity to confer with the Government, is not presently entitled to any additional remedies in connection with the investigation of theFinancialFrauds, is not a victim of the HealthcareFrauds, and is unable to demonstrate that an investigation into the proposed RICO enterprise would cause any additional CVRA rights to accrue.
TheFinancialFraudsallegedly perpetrated directly against Jordan includefraud, forgery, conversion, threats, and intimidation—all of which arise from the purported theft of her funds. Pet. at 3-4;id.¶ 1. Jordan argues that, for theFinancialFrauds, the Government failed to provide her CVRA rights to conferral, to proceedings free from unreasonable delay, and to treatment that is fair and respectful. Before determining whether Jordan is entitled to any of these rights, however, the Court must address two threshold questions.
4First, the Court must evaluate whether Jordan is a “victim” of theFinancialFraudsas that term is defined by the CVRA. She is. The CVRA requires “that the victim be ‘directly and proximately harmed’ [which] encompasses the traditional ‘but for’ and proximate cause analyses.”
Galvis, 564 F.3d at 175(quoting18 U.S.C. § 3771(e)(2)(A)). Jordan adequately alleges that she was a victim of theFinancialFraudsunder this standard by asserting that funds were illegally withdrawn directly from her banking and brokerage accounts without her consent.See, e.g., Pet. ¶ 9 (“Jordan was the targeted victim of Mirra’s enterprise and the massive thefts of her funds.”). Such allegations are sufficient to allege that Jordan is a victim of theFinancialFrauds.
Second, as some CVRA rights apply only once a criminal case reaches a specific stage—as is the case regarding “[t]he right to be reasonably heard at … sentencing,”18 U.S.C. § 3771(a)(4)—the Court must determine the stage to which the Government’s prosecution of theFinancialFraudshas advanced. Jordan alleges that the Government is actively investigating Mirra for thesefrauds.SeePet. at 3 (“These acts were separately and jointly the subject of ongoing criminal investigations by federal law enforcement agencies.”). In the Petition, she supports this conclusion by alleging that prosecutors received the documentary evidence she provided,see e.g., id.¶¶ 39, 50, “expressed interest” in pursuing a prosecution,id.¶¶ 40, 50, and interviewed at least one witness, namely herself,see, e.g.,id.¶ 38. Despite the Government’s representation that it never “opened any such investigation,” Resps.’ Reply Mem. 2,3the Court must accept Jordan’s plausible allegations as true, and thus will presume—solely for the purpose of evaluating the instant motion—that the Government is investigating Mirra for theFinancialFrauds.4
The parties’ dispute thus centers on if and when CVRA rights are enforceable prior to the Government’s charging of a particular crime.SeePet.’s Mem. 8; Resps.’ Mem. 6-7. Although a few courts have considered whether CVRA rights attach during the negotiation of a pre-indictment disposition, the Court is unaware of any opinion to address whether a victim’s CVRA rights attachpriorto such negotiations.5This Court, however, need not do so here. Even assuming that some CVRA rights attach as early as when the Government receives information about a potential crime and begins to investigate, taking all the allegations in the Petition to be true, the Government has satisfied its CVRA obligations because it reasonably conferred with Jordan, did not unduly delay any proceedings, and accorded her the dignity and respect due crime victims. Finally, although Jordan seeks documents and information regarding ongoing or closed Government investigations, the CVRA does not provide for such a remedy.
A. The Reasonable Right to Confer
5Jordan asserts that the Government withheld “[t]he reasonable right to confer with the attorney for the Government in the case.”18 U.S.C. § 3771(a)(5). In particular, she alleges that she requested but was denied meetings with prosecutors from the SDNY. Pet. ¶¶ 61 (“Jordan … repeatedly ask[ed] to confer and consult with prosecutors.”). Because the right to confer is not absolute but rather “reasonable,” the Government already fulfilled its conferral obligations under the CVRA with respect to its alleged investigation into theFinancialFrauds.
Although a victim should—indeed must—have a reasonable and meaningful opportunity to confer with an attorney for the Government, the statute is clear that the right may not “impair the [Government’s] prosecutorial discretion.”18 U.S.C. § 3771(d)(6). Courts have thus interpreted the law to establish “only a requirement that the government confer in some reasonable way with the victims before ultimately exercising its broad discretion.”
In re Dean, 527 F.3d 391, 395 (5th Cir.2008). In other words, the CVRA “gives victims a voice, not a veto” over the Government’s decision-making.
United States v. Rubin, 558 F.Supp.2d 411, 418 (E.D.N.Y.2008);see also
United States v. Thetford, 935 F.Supp.2d 1280, 1282 (N.D.Ala.2013)(“These rights, however, do not extend to giving crime victims veto power over the prosecutor’s discretion.”);
Does, 817 F.Supp.2d at 1343(“[T]o the extent that the victims’ pre-charge CVRA rights impinge upon prosecutorial discretion, under the plain language of the statute those rights must yield.”). The CVRA’s legislative history supports the conclusion that while“[t]his right [to confer] is intended to be expansive,” and allows for the victim to
“confer with the government concerning any critical stage or disposition of the case,”150 Cong. Rec. S4260-01(daily ed. Apr. 22, 2004) (statement of Sen. Feinstein), “[t]his right to confer does not give the crime victim any right to direct the prosecution.”Id.(statement of Sen. Kyl).
Less clear is at what point during a criminal prosecution a victim can invoke her right to confer. While some courts have held that the Government does not “have an obligation under the CVRA to confer with [CVRA] petitioners until after a charge was filed,”
Petersen, 2010 WL 5108692, at *2, others have found that the statute mandates conferral before the Government consummates a pre-indictment plea bargain,see, e.g.,
Dean, 527 F.3d at 394, Jordan asks this Court to extend the right even earlier in the prosecutorial process and require the Government to confer with CVRA victims before a prosecution has advanced beyond the investigatory stage. This Court need not make this determination, however, in light of “the specific facts and circumstances of this case.”
Because the Petition does not allege that prosecution of theFinancialFraudshas advanced beyond investigation, and even Jordan concedes that obligations to CVRA victims are “truncated … during an investigative stage, for obvious reasons,” Oral Arg. Tr. 31:19-21, the Government fulfilled its reasonable conferral obligations when its attorney received and reviewed Jordan’s documents and attended an hour-long meeting to discuss her allegations.
Jordan alleges that in April 2011, her attorney sought a meeting with a SDNY prosecutor “to discuss the vastfinancialfraudconducted against Jordan by Mirra.” Pet. ¶ 36. In preparation for that meeting, her attorney “sent extensive documentation to [the prosecutor] that detailed the enterprise’s fraudulentfinancialactivity regarding Jordan’s bank accounts, a full range of forged documents … as well as documents evincing forgeries.”Id.¶ 39. Jordan herself also “called the FBI in New York” in advance of the meeting and spoke with a FBI Special Agent working with SDNY prosecutors about her allegations.Id.¶¶ 37-38. In addition, in May 2011, Jordan’s counsel “met with [an] AUSA … of the Southern District of New York in an hour-long meeting” at which time the attorney “provided everything law enforcement would need in an investigation related to Mirra and his associates.”Id.¶ 39.6Thus, even if Jordan’s reasonable right to confer with the attorney for the Government in the case had attached prior to the filing of criminal charges or negotiation of a pre-indictment disposition, SDNY prosecutors fulfilled their obligation when an AUSA received and reviewed the documents she submitted, met with her attorney, and listened to her allegations. “At least in the posture of this case (and we do not speculate on the applicability to other situations),”
Dean, 527 F.3d at 394, the Government did not violate the CVRA.
6To the extent the Petition alleges that Jordan is entitled to additional meetings with lawyers for other Government offices such as the EDPA, it is rejected. As another district court observed, “[t]he CVRA cannot realistically be read to create upon mere citizen complaint a self-effectuating right … regardless of its impact on resources, any pending investigation or prosecutorial discretion.”
United States v. Rubin, 558 F.Supp.2d 411, 420 (E.D.N.Y.2008). Although those who feel
they are victims of federal crimes will and should attempt to convince interested agencies to pursue prosecution, they cannot dictate the manner, timing, or quantity of conferrals. In light of her interaction with the SDNY, the Government fulfilled its obligation to confer with Jordan during its purported investigation of theFinancialFrauds. To hold otherwise would unnecessarily and unreasonably burden the DOJ and its prosecutors.
B. The Right to Proceedings Free From Unreasonable Delay
Jordan next claims that the Government violated her “right to proceedings free [from] unreasonable delay.” Pet. at 3;18 U.S.C. § 3771(a)(7). Courts have consistently found that this provision does not provide any substantive right, but rather “’confer[s] participatory rights on the victim,’ that is, the right to object to delay and ask the Court to hold both government and defendant to what the Speedy Trial Act already requires.”
Rubin, 558 F.Supp.2d at 427(quoting
United States v. Turner, 367 F.Supp.2d 319, 334 (E.D.N.Y.2005)). Indeed, “[t]he Senate sponsors of the CVRA were explicit in their view that the statutory right to proceedings free from unreasonable delay neither ‘curtail[s] the Government’s need for reasonable time to organize and prosecute its case’ nor ‘infringe[s] on the defendant’s due process right to prepare a defense.’ ”
Turner, 367 F.Supp.2d at 334(quoting 150 Cong. Rec. S10911 (daily ed. Oct. 9, 2004) (statement of Sen. Kyl)).
At oral argument, Jordan clarified that she is objecting not to delays in any criminal proceedings but rather delays in the Government’s response to her conferral requests.SeeOral Arg, Tr, at 40:1-4. Even if a delay in providing a reasonable opportunity to confer could be viewed as a delay inproceedings, for the reasons described above, the Government has fulfilled its conferral obligations. As such, Jordan’s delay claim fails.
C. The Right to be Treated with Fairness, Respect, and Dignity
7Jordan also claims that the Government violated her CVRA right to “be treated with fairness and with respect for the victim’s dignity and privacy.” Pet. at 3;18 U.S.C. § 3771(a)(8). “Neither the text of the statute nor its legislative history provides guidance as to what specific procedures or substantive relief, if any, Congress intended this provision to require or prohibit.”
Turner, 367 F.Supp.2d at 335. As the
court noted, “[w]hile this provision must be read liberally as giving courts and the government the mission to do all that they can to vindicate a victim’s legitimate requests for fairness, respect and dignity, the Court doubts, strongly, that the authors of the statute succeeded in doing more.”558 F.Supp.2d at 427.
Here, Jordan claims that the Government impinged on this right when it rejected her requests for additional meetings after the one that occurred in May 2011. In particular, Jordan alleges that prosecutors declined to meet with her because the office of the District Attorney of New York County “requested that there be no face-to-face meeting between Jordan and federal prosecutors” in light of its pending case against her. Pet. ¶¶ 71-72 (“[I]n curious deference to the wishes of state prosecutors … [AUSAs] refused to meet with Jordan.”). She argues that “[s]uch inexplicably collusive behavior undermines the very spirit of the CVRA and its express mandate to treat Jordan ‘with fairness and with respect for [her] dignity and privacy,’ as the victim of Mirra’s enterprise’s federal crimes.”Id.¶ 72.
While the Court must ensure that the Government meets its obligation to treat victims with dignity and respect, the mere
allegation that it chose not to meet with Jordan again, after prosecutors and law enforcement considered her accusations on numerous occasions, does not constitute a plausible deprivation of this right—“[e]ven assuming that this right attaches before an offense has been charged.”
Stegman v. United States, No. 14–CV–2445 (JWL), 2015 WL 728487, at *2 (D.Kan. Feb. 19, 2015). Jordan alleges that federal law enforcement officers from the FBI and HHS “met[ ] with her repeatedly,” Pet. ¶ 90, that an AUSA for the SDNY held a meeting with her chosen representative,id.¶¶ 39-40, and that multiple federal prosecutors from different districts received and promised to review the files she provided,see id.¶¶ 39, 48 (SDNY); ¶¶ 49-50 (EDPA). Jordan corresponded not only with agents and line prosecutors, but at one point spoke with the “First Ass[istant] US Attorney … of the Eastern District [of Pennsylvania]” who purportedly “was apologetic” for the lack of response from his office, “explained that the case was being assigned to … the (then) Chief of their Criminal Division,” and “asked [Jordan’s attorney] to re-send the material to both the [Chief of the Criminal Division] and himself again.”Id.¶ 50. Although the relevant prosecutors’ offices either have yet to file an indictment or ultimately declined to do so, they did not fail to accord Jordan the fairness, dignity, and respect required by the CVRA.
Why the Government declined to meet with Jordan again is irrelevant to this analysis. Although she asks this Court to scrutinize the prosecutors’ reasons for refusing to do so, the CVRA right to dignity entitles her only to fair and respectful treatment—which she has received. Even accepting as true that prosecutors refused to meet with Jordan due to her then open murder case, in deference to the District Attorney, the CVRA bars this Court from second guessing the Government’s prosecutorial decisions.18 U.S.C. § 3771(d)(6)(“Nothing in this chapter shall be construed to impair the prosecutorial discretion of the Attorney General or any officer under his direction.”);see also
Thetford, 935 F.Supp.2d at 1282(“These rights, however, do not extend to giving crime victims veto power over the prosecutor’s discretion,”);
Rubin, 558 F.Supp.2d at 418(“[T]he CVRA, for the most part, gives victims a voice, not a veto.”);
United States v. BP Products N. Am. Inc., No. CRIM. H–07–434, 2008 WL 501321, at *11 (S.D.Tex. Feb. 21,2008)(“Decisions on whether to charge, who to charge, and what to charge, are all in the prosecutor’s discretion.”).
D. Investigative Files
8Jordan also asserts that the CVRA requires that the Government “furnish the documents which further demonstrate Mirra’s status as a criminal perpetrator.” Pet. ¶ 81. The Petition recounts rejected Freedom of Information Act requests,see id.¶¶ 74-80, and demands that the Government “disclose the existence of any and all investigations of Raymond A. Mirra, closed or ongoing,”id.at 36.
10“Any information-gathering aspect of [the CVRA] is necessarily circumscribed, in the first instance, by its relevance to a victim’s right to participate in the federal criminal proceedings at hand and to do so within the bounds demarked by the CVRA.”
Rubin, 558 F.Supp.2d at 425. For example, in connection with the right to participate in court proceedings, the CVRA may entitle a victim to “information necessary to form and communicate the victims’ views to the court.”
BP Products, 2008 WL 501321, at *14. Alternatively, to pursue statutory compensation, a victim may seek“information from the government in connection with restitution.”
Rubin, 558 F.Supp.2d at 425. But the CVRA does not entitle victims to investigative information independent of any
particular right the statute provides.See
Stegman, 2015 WL 728487, at *2(“The United States Attorney, however, does not have an obligation under the CVRA … to disclose anything in its investigative file to [the supposed victim].”);
Rubin, 558 F.Supp.2d at 425(“[T]he CVRA … does not authorize an unbridled gallop to any and all information in the government’s files.”);
United States v. Hunter, No. 07–CR–307 (DAK), 2008 WL 110488, at *1 (D.Utah Jan. 8, 2008)(finding a purported CVRA victim had no right to “review the U.S. Attorney’s investigative and discovery files as well as grand jury materials … to prove [the petitioner] was a ‘victim’ ”). As Jordan does not allege that the documentation and information she seeks is related to an enumerated provision of the CVRA or any other statute, she is entitled to neither “the documents which demonstrate Mirra’s status as a criminal perpetrator,” Pet. ¶ 81, nor any other information about the progress of the Government’s investigations.
The second category of federal crimes for which Jordan alleges she is a victim are the HealthcareFraudsof “black-marketing HIV/AIDS drugs, drug diversion, money laundering and Medicaidfraud.” Pet. ¶ 85. In contrast to her allegations regarding theFinancialFrauds, Jordan asserts that prosecution of the HealthcareFraudshas moved beyond the investigation stage and is currently post-indictment.Seeid.¶ 32 (citing Superseding Indictment,United States v. Viera, S2 11-CR-1072 (DLC) (S.D.N.Y. Aug. 14, 2032)). In particular, Jordan alleges that Mirra “had to have been either a person of interest, a subject or a target of this wide-ranging multi-agency investigation.”Id.¶¶ 32-33. She also suggests that Mirra is likely one of the defendants in “four of the thirteen unresolved prosecutions [that] are sealed.”Id.¶ 13. From these allegations, she argues and the Court agrees, that the Petition supports an inference that Mirra is either under indictment or has “received non-prosecution agreements or plea deals in regard to” the HealthcareFrauds.Id.¶ 88;see alsoOral Arg. Tr. at 28:21-29:1.
11For the HealthcareFrauds, Jordan argues that the Government deprived her of each of the three rights discussed above as well as the right to be informed in a timely manner of any plea bargain or deferred prosecution agreement. Pet. at 3; Oral Arg. 41:21-23. Jordan, however, is not entitled to any CVRA remedies in connection with these rights because she was not “directly and proximately harmed” by the HealthcareFrauds.18 U.S.C. § 3771(e)(2)(A). Accordingly, she is not a victim under the statute.
Jordan first argues that she is a victim of the HealthcareFraudsbecause “the monies fraudulently transferred from Jordan’s personal bank accounts … were used by Mirra [as] the functional operating capital” for the HealthcareFrauds. Pet. ¶ 35. This argument is unavailing. Consider the Second Circuit’s decision in
In re Rendon Galvis, 564 F.3d 170 (2d Cir.2009). There, the district court held that an individual murdered by a Columbian guerrilla leader did not qualify as a victim under the CVRA in a case in which the defendant was charged not with the murder but with importing drugs.
Id.at 173. The circuit agreed, concluding that although the defendant “was, to some extent, responsible” for the purported victim’s murder,“there was insufficient evidence of a nexus between [his] death and [the defendant’s] participation in the charged conspiracy to import cocaine.”
Id.at 175. The court reasoned that “[w]hile the evidence may suggest some linkages between [the decedent’s] murder and the drug conspiracy, we do not find any clear error in the district court’s conclusion that [the decedent]
ultimately failed to show the requisite causal connection between the two.”
In other words, while the decedent’s representatives alleged a relationship between the charged narcotics crime and the murder, his CVRA claim failed because he could not allege that the charged narcotics conspiracy was itself the cause of the harm.
Here, Jordan alleges that Mirra used her funds tofinancehis HealthcareFrauds. Pet. ¶ 35. Just as in
, however, the charged HealthcareFraudsfor which Jordan argues she is a victim did notcausethe “financialpillaging” that directly and proximately harmed her; that, rather, was caused by theFinancialFraudsdescribed above.See
Galvis, 564 F.3d at 175; Pet. ¶ 5;see also
In re McNulty, 597 F.3d 344, 346–48 (6th Cir.2010)(rejecting CVRA claim of an individual who was fired for refusing to participate in an illicit antitrust scheme because the antitrust violations did not cause his firing even if the firing advanced the antitrust offenses);
United States v. Sharp, 463 F.Supp.2d 556, 566 (E.D.Va.2006)(dismissing CVRA claim of an abuse victim who claimed that the defendant, charged with narcotics distribution, sold drugs to her abuser that caused the abuse, because the causal connection between the crimes was too tenuous). Jordan cannot therefore claim to be a victim on this basis.
Jordan also claims to be a victim of the HealthcareFraudsbecause Mirra laundered illegal proceeds through accounts that—unbeknownst to her—bore her name. Specifically, the Petition states:
The enterprise then ensnared Jordan in a complex network of offshore trusts, limited liability companies and bank accounts, forging her name to seminalfinancialinstruments to establish and manipulate these entities without Jordan’s knowledge. Through these clandestine offshore vehicles, Mirra and his criminal associates laundered illicit gains from their healthcarefraud.
Pet. ¶ 9, These allegations are also insufficient to make Jordan a victim under the CVRA. The Petition does not explain how the deposit and withdrawal of funds into a fraudulent account Jordan did not know to exist harmed her, let alone how it did so directly and proximately. Moreover, as the Second Circuit has repeatedly held in another context, “the victim of money laundering is ‘ordinarily society at large,’” and not any particular individual, because “[s]ociety is harmed when, for example, the ill-gotten gains from a criminal enterprise are allowed to be used for profit.”
United States v. Sabbeth, 262 F.3d 207, 221 (2d Cir.2001)(quoting
United States v. Napoli, 179 F.3d 1, 7 (2d Cir.1999));see also
United States v. Crum, No. 1:05 CR 65, 2006 WL 4102280, at *2 n. 2 (S.D.Ohio Apr. 13, 2006)(refusing to accord victim status for money laundering under the Mandatory Victims’ Rights Act because “society at large is generally considered to be the victim of this offense”) (citing
United States v. Szur, 289 F.3d 200, 215 (2nd Cir.2002)). Jordan is therefore not entitled to CVRA remedies for the HealthcareFrauds.
Lastly, Jordan alleges that she is a victim of a RICO conspiracy that combines both categories of crimes discussed above.Jordan claims to “have consulted with both former law-enforcement agents and prosecutors who confirm that the above-referenced agencies were investigating the large-scale activities of Mirra’s enterprise, and his omission from any existing indictments bespeaks a wider, ongoing investigation within the context of a potential RICO prosecution.” Pet. ¶ 33. Under this theory, theFinancialFraudsperpetrated directly against Jordan and the illegal HealthcareFraudsunder indictment are
predicate acts of a larger RICO enterprise for which she contends she is a “victim … as that term is clearly defined in the CVRA.”Id.¶ 34. Essentially, by alleging the possibility of a RICO charge, Jordan attempts to shoehorn the crimes for which she is an alleged victim into the verifiable healthcare indictments for which she is not.
Even accepting as true that prosecutors are or were at some point contemplating charging Mirra in a RICO conspiracy, the Government has fulfilled its obligations at this time. While Jordan attempts to combine theFinancialand HealthcareFraudsinto a purported RICO prosecution, she acknowledges that this theory has not yet been adopted by the Government. The Petition recognizes that the existing healthcare indictments do not include any RICO charges, detail anyfraudsperpetrated against Jordan, or even name Mirra as an offender.See id.¶¶ 32-33 (citing Superseding Indictment,United States v. Viera, S2 11-CR-1072 (DLC) (S.D.N.Y. Aug. 14, 2012)). The Petition indeed states that there exists, at most, “a potential criminal RICO prosecution.”Id.¶ 33. Based on Jordan’s allegations, therefore, the Government has pursued the alleged prosecution of a “potential” RICO indictment no further than it has for theFinancialFrauds: it may be investigating, but has done nothing more. As described above, Jordan had an opportunity to confer with an attorney for the Government in 2011 and, to date, the Government has declined to indict Mirra or offer him a pre-indictment disposition for any crimes for which Jordan can claim to have been directly and proximately harmed. At this nascent stage, the Government has thus satisfied its obligations under the CVRA.
It is critical to our system of justice that the Government treat the victims of federal crimes with fairness, respect, and dignity. The CVRA requires as much, as does common courtesy and good prosecutorial practice. The scope of the CVRA, however, is not limitless. It, for example, applies only to those “directly and proximately harmed as a result of the commission of a Federal offense,” is limited in part by what is “reasonable,” and may in no way “be construed to impair the prosecutorial discretion of the [Government].” In this case, even accepting all the allegations as true, where Jordan was given a reasonable opportunity to confer with the Government about the only crimes for which she is a victim—none of which have yet been charged—she is entitled to no more. The Government’s motion to dismiss the Petition is thus granted and the Court respectfully directs the Clerk of Court to close the case.
173 F.Supp.3d 44
Except as otherwise noted, the facts set forth herein are taken from the Petition and are presumed to be true for the purposes of this motion to dismiss.
As noted in the Petition, in February 2010, Jordan was arrested and charged by the New York County District Attorney’s Office with the murder of her son. Pet. ¶ 10 n.1. In November 2014, she was convicted of manslaughter under extreme emotional disturbance.Id.
More specifically, the Government represented in its reply brief “that neither [SONY nor EDPA] opened any such investigation or,a fortiori, entered into a plea agreement or deferred prosecution agreement. Nor is [SDNY or EDPA] aware of any other open criminal case in which Petitioner has been identified as a crime victim as defined by the CVRA.” Resps.’ Reply Mem. 2.
Although the Petition also alleges that “upon information and belief Mirra and others involved in thefraudagainst Jordan described have received non-prosecution agreements or plea deals in regard to federal crimes,” Pet. ¶ 88. at oral argument, counsel clarified that this allegation relates only to the HealthcareFrauds, and that Jordan possesses no facts that would permit her to plead the existence of a non-prosecution agreement or plea deal concerning theFinancialFrauds.SeeOral Arg. Tr. at 28:21-29:2.
For example, while some courts have held that CVRA rights attach when the government negotiates such a disposition, others have found no right to exist prior to the filing of an accusatory criminal instrument.Compare
Does v. United States, 817 F.Supp.2d 1337, 1342 (S.D.Fla.2011)(“[T]o avoid a strained reading of the [CVRA], those rights must attach before a complaint or indictment formally charges the defendant with the crime.”)with
United States v. Daly, No. 11–CR–121 (AWT), 2012 WL 315409, at *4 (D.Conn, Feb. 1, 2012)(finding that CVRA rights attach “no sooner than the point in time when an offense has been charged”);
In re Petersen, No. 2:10–CV–298 RM, 2010 WL 5108692, at *2 (N.D.Ind. Dec. 8, 2010). Whether and when CVRA rights can be invoked at earlier points in a prosecution, such as at the investigatory stage, appears to have been explored at this point only in the academic literature.See, e.g., Paul G. Cassell et. al.,
Crime Victims’ Rights During Criminal Investigations? Applying the Crime Victims’ Rights Act Before Criminal Charges Are Filed, 104 J. Crim. L. & Criminology 59 (2014); Elliot Smith,
Is There A Pre-Charge Conferral Right in the CVRA?, 2010 U. Chi. Legal F. 407 (2010).
Jordan does not argue that the CVRA requires the government to confer with the victim herself, as opposed to the victim’s chosen representative. Indeed, the CVRA provides that “[t]hese rights may be enforced by the crime victim or the crime victim’s lawful representative.”18 U.S.C. § 3771(b)(2)(B)(i).
FEDERAL CASES – CRIMINAL CASE
274 F.Supp.2d 648
United States District Court,
UNITED STATES OF AMERICA
Martin L. GRASS Franklin C. Brown Franklyn M. Bergonzi
Nos. CR. 1CR02–146–01, CR. 1CR02–146–02, CR. 1CR02–146–03.
March 18, 2003.
Defendants, charged with wirefraud, moved for dismissal of indictment count seeking criminal forfeiture of assets derived from fruits of fraudulent transfers. The District Court,
, J., held that: (1) failure to show that wire transfers of funds from corporations to defendants, who were officers, for their private use, affected transferor banks, precluded forfeiture; (2) land received in return for payment to vendor bank, made out of fraudulently obtained funds, was not subject to forfeit; and (3) dismissal of indictment count was not impermissible judgment on sufficiency of government’s evidence.
239 F. Supp.2d 535
Attorneys and Law Firms
Kim Douglas Daniel, U.S. Attorney’s Office, Harrisburg, PA, for Plaintiff.
Mark T. Stancil, Baker Botts LLP, Washington, DC, Martin L. Grass, Virginia Beach, VA,Mary C. Spearing,Rebecca H. Ewing,William H. Jeffress, Baker Botts LLP, Washington, DC, for Martin L. Grass.
April A. Oliver,Erik L. Kitchen,Matthew L. Stennes,Reid H. Weingarten, Steptoe & Johnson, LLP, Washington, DC,Franklin C. Brown,Joseph U. Metz, Dilworth Paxson LLP, Harrisburg, PA, for Franklin C. Brown.
Franklin M. Bergonzi, Hummelstown, PA,Ira H. Raphaelson,William J. Stuckwisch, O’Melveny & Myers LLP, Washington, DC,William John Fulton, Harrisburg, PA, for Franklin M. Bergonzi.
Edward F. Mannino,Jason A. Snyderman, Akin, Gump, Strauss, Hauer & Feld, LLP, Philadelphia, PA, for Deloitte & Touche, LLP.
Eric Sitarchuk, Ballard, Spahr, Andrews & Ingersoll,Paul Lantieri, III, Philadelphia, PA, for Rite Aid Corporation.
RAMBO, District Judge.
Before the court is Defendants Martin Grass, Franklin Brown, and Frank Bergonzi’s renewed motion to dismiss Count 32 of the Indictment. The parties have briefed the issue, and the matter is ripe for disposition.
On June 21, 2002, a federal grand jury sitting in Harrisburg, Pennsylvania issued a thirty-seven count indictment against Defendants, former officers and directors for the Rite Aid Corporation.1In Counts 26 through 29 of the Indictment, the Government charges Defendants with four counts of wirefraud. The accusations arise out of the following actions: (1) the transfer of approximately $2.6 million from a Rite Aid account at Chase Manhattan Bank into an account belonging to CCA Associates, Inc. (“CCA”), a subsidiary of a partnership owned by Defendant Grass and his brother-in-law (Count 26); (2) the transfer of approximately $898,000 from Rite Aid to Defendant Grass as a bonus for Rite Aid’s performance during its fiscal year (“FY”) 1998 (Count 27); (3) the transfer of approximately $337,000 to Defendant Brown as a bonus for FY 1998 (Count 28); (4) the transfer of approximately $300,000 to Defendant Bergonzi as a bonus for FY 1998 (Count 29). Based on these allegations, the Government, in Count 32 of the Indictment, asserts that it is entitled to a criminal forfeiture of Defendants’ assets derived from the fruits of the alleged wirefrauds.See18 U.S.C. § 982(a)(2)(A). On September 4, 2002, Defendants moved to
dismiss that count pursuant toFederal Rule of Criminal Procedure 12(b)(3)(B).2
By an order dated December 17, 2002, the court denied that motion without prejudice to renew the motion after the Government filed a bill of particulars as to Count 32.United States v. Grass, et al.,Nos. CR:02–146–01, 02, 03 order (M.D.Pa. Dec. 17, 2002). The Government argued, in opposition to Defendants’ original motion to dismiss Count 32, that its allegations in that count were legally sufficient because the allegations tracked the language of the applicable criminal forfeiture statute. The court rejected that contention, finding that the mere accusation that Defendants’fraud“affected afinancialinstitution” was so vague that it prevented Defendants from mounting a defense.United States v. Grass, Nos. CR:02–146–01, 02, 03 slip. op. at 7 (M.D.Pa. Dec. 17, 2002) [hereinafter “Memo. Dec. 17, 2002”] (quoting Indictment, Count 32 at ¶ 2);see also18 U.S.C. § 982(a)(2)(A). The court also held that the Government’s descriptions of four separate wire transfers from Rite Aid’s bank accounts did not cure this defect for one of two alternative reasons.
First, if the transfer of funds from one account to another is the only manner in which thefinancialinstitution is affected, then … the allegations fail because …18 U.S.C. § 982(a)(2)(A)requires that thefinancialinstitution be adversely affected in some manner to trigger a criminal forfeiture of the wirefraud’sproceeds…. Mere use of [thefinancialinstitution] to execute the transfers will not suffice as a matter of law. Second, if the wire transfers affected thesefinancialinstitutions in other ways – or if the wire transfers affected other unnamedfinancialinstitutions –then Count 32 fails in that it does not adequately inform Defendants of the nature of the charges against them.
. . . . .
It is important to resolve which of these reasons actually applies; although it is impossible to do so on the record currently before the court. If the first reason applies – and the indictment is insufficient because it does not allege that afinancialinstitution was adversely affected – the remedy is to dismiss Count 32 of the indictment for failure to allege a crime…. On the other hand, if the second reason applies – and the indictment is insufficient because it merely fails to adequately specify the manner in which the wirefraudsaffected afinancialinstitution or whichfinancialinstitutions were affected – then this error may be cured by a bill of particulars.
Because Defendants’ motion for a bill of particulars regarding Count 32 was pending at the time, the court granted that motion in lieu of dismissing the count as legally deficient. The court admonished the Government that its bill of particulars “should remove any doubt as to the manner in which Defendants’ alleged wirefraudaffectedfinancialinstitutions and whatfinancialinstitutions it affected.”Id.at 9.
On December 23, 2002, the Government filed the Bill of Particulars with respect to Count 32 of the Indictment. In that document,
the Government lists the losses that the “affected”financialinstitutions suffered as a result of Defendants’ alleged wirefrauds. As to Count 26, relating to the transfer of approximately $2.6 million from Rite Aid’s account at Chase Manhattan Bank to CCA’s account at Dauphin Deposit,3Chase Manhattan was adversely affected by this process through “loss of income and expenses incurred as a consequence of transferring $2,613,212 from thatfinancialinstitution to another entity.” (Bill of Part. at 2.) PNC Bank was adversely affected by the potential loss of proceeds derived from its sale of the eighty-three acre parcel of land and through its exposure to potential fees and expenses that it may have had to incur to defend its title to the money it derived from a transaction with CCA. (Id.) As to Counts 27, 28, and 29 –which pertain to the transfers of funds from Rite Aid’s account with Dauphin Deposit Bank to pay FY 1998 bonuses to Defendants Grass, Brown, Bergonzi – the Government alleges that Dauphin Deposit suffered in the form of lost interest that it would have received had Defendants not fraudulently procured the transfer of funds, in addition to expenses that Dauphin Deposit incurred in transferring the funds. (Id.at 3.) On January 13, 2003, Defendants filed a renewed motion to dismiss Count 32 pursuant toFederal Rule of Criminal Procedure 12(b)(3)(B).
II.Legal Standard: Motion to Dismiss
“An indictment is an accusation only, and its purpose is to identify the defendant’s alleged offense … and fully inform the accused of the nature of the charges so as to enable him to prepare any defense he might have.”
United States v. Stansfield,171 F.3d 806, 812 (3d Cir.1999)(quotations and citations omitted). A defendant, however, may move to dismiss an indictment based on defects in the indictment, lack of jurisdiction, or failure to charge an offense.Fed.R.Crim.P. 12(b)(3)(B).
An indictment, however, is sufficient “if it, first contains the elements of the offense charged and fairly informs a defendant of the charge against him, and second, enables him to plead an acquittal or conviction in bar of future prosecutions for the same offense.”
Hamling v. United States,418 U.S. 87, 117, 94 S.Ct. 2887, 41 L.Ed.2d 590 (1974)(citing
Hagner v. United States,285 U.S. 427, 52 S.Ct. 417, 76 L.Ed. 861 (1932)and
United States v. Debrow,346 U.S. 374, 74 S.Ct. 113, 98 L.Ed. 92 (1953));accord
United States v. Cefaratti,221 F.3d 502, 507 (3d Cir.2000)(“An indictment … to be sufficient must contain all essential elements of the charged offense.”). In addressing a motion pursuant toRule 12(b)(3)(B), the indictment “is to be tested solely on the basis of the allegations made on its face, and such allegations are to be taken as true.”
United States v. Hall,20 F.3d 1084, 1087 (10th Cir.1994);accord
United States v. Caicedo,47 F.3d 370, 371 (9th Cir.1995);
United States v. Cadillac Overall Supply Co.,568 F.2d 1078, 1082 (5th Cir.1978).
In Counts 26 through 29, Defendants are accused of committing wirefraudin violation of18 U.S.C. § 1343. In Count 32, the Government seeks criminal forfeiture of money and land obtained through the alleged wirefraudsbased on18 U.S.C. § 982(a)(2)(A). In support of their argument for dismissing Count 32, Defendants contend that Count 32 fails, as a matter of
law, because the Government alleges thefinancialinstitutions implicated in Counts 26 through 29 merely served as conduits for the fraudulent transfers and, thus, were not adversely affected by such transactions. For the reasons stated below, the court agrees and will dismiss Count 32 of the indictment.
A.Chase Manhattan Bank and Dauphin Deposit
1Count 26 of the Indictment, as now explicated by the Bill of Particulars, alleges that Defendants, through fraudulent means, caused Chase Manhattan Bank to transfer approximately $2.6 million from Rite Aid’s account to an account belonging to CCA. As a result, Chase Manhattan suffered through unspecified lost income and expenses incurred in transferring the money. Counts 27 through 29, allege that Defendants, through fraudulent accounting, caused Dauphin Deposit to transfer FY 1998 bonuses from a Rite Aid account to Defendants. As a result, Dauphin Deposit, like Chase Manhattan, suffered through the loss of income and expenses incurred in transferring the funds.4
The court finds that these allegations, even if true, are insufficient to obtain a criminal forfeiture pursuant to18 U.S.C. § 982(a)(2)(A)because the allegedly fraudulent wire transfers did not adversely affect Chase Manhattan or Dauphin Deposit. In relevant part,§ 982(a)(2)(A)reads as follows:
The court, in imposing sentence on a person convicted of a violation of, or a conspiracy to violate …section … 1343[wirefraud] … of this title,affecting afinancialinstitution… shall order that the person forfeit to the United States any property constituting, or derived from, proceeds the person obtained directly or indirectly, as a result of such violation.
2Thus,§ 982(a)(2)(A)requires that a wirefraudaffect afinancialinstitution to allow the Government to obtain thefraud’sproceeds through a criminal forfeiture. As the court previously held, “the term ‘affecting afinancialinstitution’ requires an allegation that thefinancialinstitution was affected in an adverse manner, rather than merely used as an instrumentality of the crime.”SeeMemo. Dec. 17, 2002 at 4–6 (citing
United States v. Ubakanma,215 F.3d 421, 426 (4thCir.2000)(holding enhanced sentencing provisions for wirefraudaffecting afinancialinstitution available only if “the institution itself were victimized by thefraud, as opposed to the scheme’s mere utilization of thefinancialinstitution in the transfer of funds”);
United States v. Agne,214 F.3d 47, 51 (1st Cir.2000)(holding that ten-year statute of limitations for charges offraudaffecting afinancialinstitution is unavailable unless there is “some negative consequence to thefinancialinstitution to invoke the extended statute of limitations”);
United States v. Bennett,161 F.3d 171, 193 (3d Cir.1998)(holding that offense affected afinancialinstitution where securities firm used as instrumentality of thefraudwas subsequently sued by bankruptcy trustee for $150 million);
United States v. Johnson,130 F.3d 1352, 1355 (9th Cir.1997)(holding enhanced sentencing guideline applicable where embezzlement affected a bank by causing it legal expenses and by damaging its reputation, its employees’ morale, and its customer relations);
United States v. Schinnell,80 F.3d 1064, 1070 (5th Cir.1996)(same, where forgery “realistically exposed [bank] to substantial potential liability” becausefraudvictim and bank were involved in negotiating settlement andfraudvictim indicated that if settlement fell through it would sue bank to recover lost funds);
United States v. Mizrachi,48 F.3d 651, 656 (2d Cir.1995)(same, construing “affecting” afinancialinstitution to require victimization of the institution);
United States v. Pelullo,964 F.2d 193, 214–16 (3d Cir.1992)(holding available extended statute of limitations for wirefraudaffecting afinancialinstitution wherefraudwas perpetrated on wholly-owned subsidiary offinancialinstitution);
United States v. Esterman,135 F.Supp.2d 917, 920 (N.D.Ill.2001)(holding criminal forfeiture unavailable under§ 982(a)(2)(A)wherefinancialinstitution was merely conduit for transfer of funds)).5
In effect, the Government argues that Chase Manhattan and Dauphin Deposit suffered adverse effects from Defendants’ alleged wirefraudsbecause those banks could no longer earn interest on the money that Defendants caused to be transferred from Rite Aid’s accounts. Under the Government’s theory, any time a wirefraudcauses a bank to transfer funds, criminal forfeiture would be appropriate without a showing that thefinancialinstitution suffered a loss or was exposed to some tangible, realistic risk. This argument stands in stark contrast to the holdings of numerous courts, including this court, that the mere transfer of funds does not affect afinancialinstitution. Similarly, adopting the Government’s contention with respect to lost income would convert the requirement that a wirefraudaffectafinancialinstitution to one requiring only that the wirefraudaccessafinancialinstitution.6Courts have broadly interpreted the phrase “affecting afinancialinstitution.”See, e.g.,
United States v. Bouyea,152 F.3d 192, 195 (2d Cir.1998)(holding thatfraudaffected afinancialinstitution wherefraudwas perpetrated on wholly-owned subsidiary offinancialinstitution which itself was not afinancialinstitution). However, no court has extended its interpretation to include the type of losses banks ordinarily incur in conducting completely legitimate transactions. Accordingly, such losses are not enough to trigger a criminal forfeiture pursuant to18 U.S.C. § 982(a)(2)(A).
3Likewise, where a bank incurs only routine transaction costs—which it would
have incurred had the transaction been completely legitimate—the transaction does not affect afinancialinstitution. Instead, thefinancialinstitution must be “victimized by thefraud.”
Ubakanma,215 F.3d at 426.Routine costs for transactions which, from the bank’s point of view, are completely normal do not satisfy this standard.
Esterman,135 F.Supp.2d at 920(rejecting the Government’s contention that bank was adversely affected where the bank “was called upon to do nothing more than to honor the authorizations that were wholly regular from the bank’s perspective, conforming to the express terms of the signature cards that had been delivered to the bank”). From the bank’s point of view, there is no difference between Defendants’ transfers, procured throughfraud, and legitimate Rite Aid transfers. Even assuming that the Government’s allegations are completely true, the wirefrauddid not affect thefinancialinstitutions anymore than a normal, legitimate transaction would have. Therefore, thesefinancialinstitutions were not “affected” as that term is used in18 U.S.C. § 982(a)(2)(A).
Surprisingly, the Government does not allege that anyfinancialinstitution, or its subsidiary, was a Rite Aid shareholder. If such an entity were a Rite Aid shareholder, then Defendants alleged wirefraudwould have affected that institution because the wirefraudsallegedly victimized Rite Aid and its shareholders.See, e.g.,
United States v. Monus,128 F.3d 376 (6th Cir.1997);see also
Pelullo,964 F.2d at 214–16(holding that extended statute of limitations for wirefraud“affecting afinancialinstitution” applicable where the defendant perpetratedfraudon wholly-owned subsidiary offinancialinstitution). InMonus,the Government issued a 109 count indictment against the Chief Operating Officer of Phar–Mor, Inc., a retail discount drugstore chain. The indictment accused Monus of orchestrating a massive accountingfraud. Among other allegations, the Government contended that Monus submitted falsefinancialstatements to severalfinancialinstitutions as a ploy to encourage those entities to purchase large blocks of Phar–Mor stock.Id.at 381. The Government obtained convictions against Monus on all 109 counts including the counts relating to the stock purchasefraud. At the sentencing stage, the United States Probation Officer recommended a four level enhancement in Monus’s sentence because the offense affected afinancialinstitution and Monus derived more than $1,000,000 in gross receipts from the offense.Id.at 395;see alsoU.S.S.G. § 2F1.1(b)(8)(B). The District Court granted the enhancement. On appeal, the Sixth Circuit upheld this portion of Monus’s sentence.See
Monus,128 F.3d at 397(“Because this offense affectedfinancialinstitutions and defendant received over a million dollars, [the District Court] applied this four level enhancement…. The District Court did not misapply the Guidelines in giving this enhancement.”).7
Because the sentencing guideline provision at issue inMonusemploys the same terminology as the criminal forfeiture statute that the Government seeks to invoke here, the court would have no problem finding that the Government’s allegation satisfied the requirements of the criminal forfeiture statute had the Government alleged that afinancialinstitution, or its
subsidiary, was a Rite Aid shareholder.Seesupraat n. 5. The holding would be the same had the Government alleged that afinancialinstitution, or its subsidiary, purchased Rite Aid stock in reliance on fraudulentfinancialstatements produced by Defendants. The Government, however, has made no such allegation.
As it stands, the Government alleges that Chase Manhattan and Dauphin Deposit were merely used as a conduit to transfer funds procured through a wirefraud. The losses that these institutions suffered, according to the Government’s allegations, are nothing more than routine transaction fees and lost income. Had Defendants procured these transactions legally, the listedfinancialinstitutions would have lost this same income and incurred these same expenses. Therefore, the Government has not alleged, as to either Chase Manhattan Bank or Dauphin Deposit Bank, that Defendants’ wirefraudaffected afinancialinstitution.
4As previously stated, in Count 26, the Government alleges that Defendant Grass caused Chase Manhattan Bank to wire approximately $2.6 million from Rite Aid’s account to a bank account belonging to CCA. (Indictment, Count 26 at ¶ 19.) That entity was the wholly-owned subsidiary of a real estate partnership owned by Defendant Grass and his brother-in-law, Tim Harrison. (Id.,Count 1 at ¶ 18.) According to the Indictment, CCA used the money to pay off the partnership’s business debt and to purchase, from PNC, eighty-three acres of land located in Fairview Township, York County, Pennsylvania. (Id.at ¶¶ 19–20.) In the Bill of Particulars, the Government alleges that this transaction affected PNC in three ways, all of which give rise to criminal forfeiture. First, the Government alleges that the wirefraudexposed PNC to the “risk of civil or criminal forfeiture offraudproceeds or property traceable tofraudproceeds received by PNC Bank in exchange for 83 acres of real estate.” (Bill of Part. at 2.) Second, the transaction affected PNC through its “unwitting involvement infinancialtransactions and monetary transactions in violation of18 U.S.C. sections 1956(a)(1)(B)and1957, by virtue of its receipt of proceeds or property traceable tofraudproceeds in exchange for the 83 acres.” (Id.) Third, the transaction caused PNC the “loss of 83 acres and $245,000 deposit, both of which would have remained the property of PNC if CCA had not used proceeds of wirefraudor property traceable thereto to pay the $1.8 million.” (Id.) For the reasons stated below, the court finds that these allegations do not amount to a wirefraud“affecting afinancialinstitution” for which criminal forfeiture would be appropriate.18 U.S.C. § 982(a)(2)(A).
1. PNC’s Risk of Criminal or Civil Forfeiture
As stated previously, the Indictment, as explicated by the Bill of Particulars, alleges that Defendants fraudulently procured the transfer of approximately $2.6 million from a Rite Aid bank account to CCA’s bank account. Allegedly, CCA then paid PNC $1.8 million of that money to purchase the eighty-three acres of land. The Government argues that criminal forfeiture of property that Defendants derived from the transfer of the funds is justified because the wirefraudexposed PNC to the potential risk of criminal or civil forfeiture of the money that it received from CCA.
The court disagrees. There is no indication that the Government has, or will, pursue a forfeiture of the $1.8 million which PNC derived from its transaction with
CCA. Moreover, it is clear, based on the allegations in the Indictment, that if the Government were to pursue a criminal or civil forfeiture, then PNC would have the benefit of an innocent owner defense.See18 U.S.C. § 983(d)(3)(A). No civil forfeiture is permitted with respect to property which is in the possession of “an innocent owner.”18 U.S.C. § 983(d)(1). The Criminal Code defines an “innocent owner” as follows:
With respect to a property interest acquired after the conduct giving rise to the forfeiture has taken place, the term “innocent owner” means a person who, at the time that person acquired the interest in the property-
(i) was a bona fide purchaser or seller for value (including a purchaser or seller of goods for value); and
(ii) did not know and was reasonably without cause to believe that the property was subject to forfeiture.
18 U.S.C. § 983(d)(3)(A).
The Indictment, as explicated by the Bill of Particulars, indicates that PNC was an innocent owner. Thus, civil forfeiture would not be appropriate. Likewise, there is no indication that PNC would be subject to a criminal forfeiture, which would occur only if the Government obtained a conviction against PNC. There is absolutely no allegation in the Indictment indicating that PNC’s conduct was anything other than innocent. Thus, the Government’s contention that PNCmighthave to defend its title to the $1.8 million in a forfeiture action is untenable and inconsistent with the Government’s contention that PNC was employed as an innocent cog in Defendants’ extensivefraudconspiracy. Although the court, in ruling on aRule 12(b)(3)(B)motion, is required to accept the factual allegations in the Indictment as true, the Government’s accusations here amounts to nothing more than a speculative and incorrect legal conclusion unsupported by factual allegations. Thus, it is entitled to no deference.
The Government does not allege any facts implicating PNC in the fraudulent transaction, nor does it allege that civil or criminal forfeiture proceedings have, or will, be initiated against PNC. The Government simply contends that itmightinitiate such proceedings against PNC. However, this does not amount to the tangible potential threat to PNC that other courts have held would amount to an adverse effect against afinancialinstitution. In each of those cases, as distinguished from the instant situation, the defendant’sfraudhad some sort of real world impact on thefinancialinstitution.See, e.
g., Bennett,161 F.3d at 193(holding that offense affected afinancialinstitution where securities firm used as instrumentality of thefraudwas subsequently sued by bankruptcy trustee for $150 million and the firm settled the claim for $18 million);
Johnson,130 F.3d at 1355(holding enhanced sentencing guideline applicable where embezzlement affected a bank by causing it unreimbursed losses of $500,000 which “included a $50,000 deductible under the bank’s fidelity bond, legal expenses, auditor’s fees, and wages for extra staff hours spent dealing with the offense”);
Mizrachi,48 F.3d 651, 656 (2d Cir.1995)(holding that offense affected afinancialinstitution where bank suffered a $4 million loss);
Pelullo,964 F.2d 193, 216 (3d Cir.1992)(holding available extended statute of limitations for wirefraudaffecting afinancialinstitution where wholly-owned subsidiary offinancialinstitution lost approximately $1.6 million).
The Fifth Circuit’s opinion inUnited States v. Schinnellis the closest the court has come to finding any support for the Government’s contention.80 F.3d 1064 (5th Cir.1996). In that case, Schinnell worked in the accounting department of
Trammell–Crow, a real estate firm located in Dallas, Texas. Over a period of five and a half years, Schinnell used her position to withdraw funds from various Trammell–Crow bank accounts for her personal use.
Id.at 1065–66.Once the scam came to light, Schinnell pled guilty. At sentencing, the court imposed a four level enhancement under former Sentencing Guideline 2F1.1(b)(6)(B) for afraudover $1 million “affecting afinancialinstitution.”8The district court held that the enhancement was justified, relying on a finding in the presentence report that Trammell–Crow and one of the banks involved had entered into a tolling agreement preserving the firm’s right to sue the bank for its lost proceeds.
Id.at 1070.On appeal, the Fifth Circuit upheld this holding, reasoning that the extensive nature of thefraudwas such that “direct harm to the banks involved was certainly reasonably foreseeable.”Id.Additionally, the existence of the tolling agreement further demonstrated that Schinnell’sfraud“realistically exposed [the banks] to substantial potential liability….”Id.
This case, however, is easily distinguishable. Here, the Government has not alleged any facts demonstrating that Defendants’fraudrealistically exposed PNC to the risk of criminal or civil forfeiture. The Government alleges that Defendants, not PNC, fraudulently procured Rite Aid funds. There is no allegation that PNC’s involvement was anything other than innocent. Therefore, neither civil nor criminal forfeiture would lie against PNC. Accordingly, the court finds that the Government’s allegation that Defendants used fraudulently procured funds to purchase a piece of property from PNC is insufficient to conclude that the transaction affected afinancialinstitution.
2. PNC’s “Unwitting” Involvement in Illegal Monetary Transactions
5According to the Government’s next argument, Defendants procured PNC’s “unwitting” involvement in illegal monetary transactions in violation of18 U.S.C. §§ 1956(a)(1)(B)and1957and that this involvement somehow adversely affected the bank. Essentially, the Government’s argument is that PNC suffered an adverse effect because, “[b]anks do not like to be involved infraud, nor in money laundering.” (Govt. Br. in Opp. Renewed Mot. to Dis. Count 32 at 9.) This simply does not satisfy the requirements necessary to trigger a criminal forfeiture. As the court held previously, the term “ ‘affecting afinancialinstitution [in§ 982(a)(2)(A)] requires an allegation that thefinancialinstitution was affected in an adverse manner, rather than merely used as an instrumentality of the crime.’ ” Memo. Dec. 17,2002 at 4. Although banks may not like being used as the instrumentality of afraudor illegal monetary transaction, the use of a bank for such a purpose does not trigger criminal forfeiture under§ 982(a)(2)(A)unless the bank suffers some sort of tangible loss. The mere fact that PNC may have been duped by Defendants, standing alone, is insufficient to satisfy this standard.
3. PNC’s “Loss” of the Land and the $245,000 Deposit
6Finally, the Government argues that PNC suffered an adverse effect from Defendants’ wirefraudthrough the “loss of 83 acres and $245,000 deposit, both of which would have remained the property of PNC Bank if CCA had not used proceeds of wirefraud… to pay the $1.8 million purchase price….” (Bill of Part. at 2.) As the Government presents it, had
Defendants not caused a fraudulent wire transfer of $2.6 million from Rite Aid, CCA would have been unable to pay PNC the $1.8 million purchase price for the eighty-three acre parcel of land in Fairview Township. If CCA did not have the money to pay PNC, CCA would have forfeited its $245,000 deposit on the land, and PNC would have retained the property. Thus, as an indirect result of thefraud, PNC lost the $245,000 and the land.
This is not an adverse effect on the bank. PNC received the full price of its arm’s length transaction with CCA. It would border on the absurd to conclude that PNC suffered an adverse effect where it received $1.8 million as a result of the transaction. At worst, the loss the Government points to – the loss of the $245,000 deposit plus the ability to sell the land to another purchaser –represents the loss of a windfall. This is not the type of loss which triggers a criminal forfeiture for a wirefraud“affecting afinancialinstitution.”18 U.S.C. § 982(a)(2)(A).
In summation, the Government’s allegations in Count 32 fail as a matter of law. The Government has not alleged facts, in either the Indictment or its Bill of Particulars, indicating that any of Defendants’ allegedly fraudulent wire transfers affected afinancialinstitution in such a manner to trigger a criminal forfeiture pursuant to§ 982(a)(2)(A). Therefore, Count 32 is facially invalid because it fails to allege a necessary element of the offense. Accordingly, the court will grant Defendants’ motion to dismiss that count.
C.The court’s holding does not constitute a premature challenge to the sufficiency of the Government’s evidence.
7Finally, the Government argues that dismissing Count 32 would constitute an impermissible judgment on the sufficiency of the Government’s evidence. According to its argument, pursuant to Rule 7(c)(2), the Government need only allege that Defendants’ property is subject to a criminal forfeiture. By tracking the applicable statutory language, the Government has satisfied its pleading burden. The court disagrees.
9The Government’s argument is nothing more than a rehashing of the argument it presented in opposition to Defendants’ original motion to dismiss Count 32. The court, however, rejected that argument.SeeMemo. Dec. 17, 2002 at 6–9. As the court indicated previously, “an indictment may track the language of the statute, as long as ‘those words of themselves fully, directly, and expressly, without any uncertainty or ambiguity, set forth all the elements necessary to constitute the offense intended to be punished.’ ”
United States v. Shirk,981 F.2d 1382, 1389 (3d Cir.1992)(quoting
Hamling v. United States,at 418 U.S. 87, 117, 94 S.Ct. 2887 (1974)). In other words, an indictment may merely track the statute’s language where the common sense understanding of the statute is sufficient to put the defendant on notice as to the factual nature of the charges against him. However, “[a]n indictment not framed to apprise the defendant ‘with reasonable certainty, of the nature of the charges against him … is defective, although it may follow the language of the statute.’ ”
Russell v. United States,369 U.S. 749, 765, 82 S.Ct. 1038, 8 L.Ed.2d 240 (1962)(quoting
United States v. Simmons,96 U.S. 360, 362, 6 Otto 360, 24 L.Ed. 819 (1877)).
The court went on to find that the mere allegation that Defendants’ fraudulently procured wire transfers “affectedfinancialinstitutions” was insufficient to put Defendants on notice of the factual nature of the charges against them.SeeMemo. Dec. 17, 2002 at 7. Accordingly, the court ordered
the Government to supplement the Indictment by filing a bill of particulars with respect to Count 32.Id.at 8–9. Thus, the Government’s allegation tracking the statutory language of18 U.S.C. § 982(a)(2)(A)did not satisfy the minimal requirements for an indictment. The allegations set forth in the Bill of Particulars are legally deficient because the Government has failed to allege an essential element – that the wirefraudaffect afinancialinstitution – for a criminal forfeiture under that statute. Accordingly, the court will dismiss that count.
Contrary to the Government’s argument, Rule 7(c)(2) does not supplant the requirement that the Indictment fully inform Defendants of the nature of the charges against them. Rule 7(c)(2) reads as follows: “No judgment of forfeiture may be entered in a criminal proceeding unless the indictment or the information provides notice that the defendant has an interest in property, that is subject to forfeiture in accordance with the applicable statute.” This rule provides that the Government must give notice to a defendant that his property is subject to a criminal forfeiture. The court does not hold that the Indictment failed to do this. Rather, the court holds that the facts alleged in the Indictment – as explicated by the Bill of Particulars – are insufficient to entitle the Government to a criminal forfeiture. Although the indictment states that Defendants’ wirefraud“affectedfinancialinstitutions,” the facts alleged indicate that thefrauddid not affectfinancialinstitutions. (Indictment, Count 32 at ¶ 2.) That is, the effects cited by the Government are legally insufficient to obtain a conviction under18 U.S.C. § 982(a)(2)(A). This is not an impermissible judgment on the sufficiency of the Government’s evidence to obtain a conviction before the jury. Rather, it is a permissible judgment on the legal sufficiency of the Government’s factual allegations. Even assuming that everyfactalleged in the Indictment and Bill of Particulars is true, those facts do not support the legal conclusion that Defendants’ wirefraudsaffected afinancialinstitution; an element necessary to obtain a conviction under§ 982(a)(2)(A). Accordingly, the court will dismiss Count 32 of the Indictment.
Because the court finds that Count 32 of the Indictment, as explicated by the Bill of Particulars, fails to allege an element necessary to obtain a conviction for violation of18 U.S.C. § 982(a)(2)(A)– namely, that Defendants committed a wirefraudorfrauds“affecting afinancialinstitution” – the court will grant Defendants’ renewed motion to dismiss that count.
In accordance with the accompanying memorandum of law,IT IS HEREBY ORDERED THATDefendants’ renewed motion to dismiss Count 32 of the indictment isGRANTED. Count 32 of the Indictment isDISMISSED.
274 F.Supp.2d 648
A current Rite Aid Vice President, Eric Sorkin, is charged under Counts 33 and 37 of the indictment. Defendant Sorkin, however, is charged in neither Counts 26 to 29, nor Count 32.
Effective December 1, 2002, the Federal Rules of Criminal Procedure have been amended. However, according to the Advisory Notes accompanyingRule 12the changes “are intended to be stylistic only …”, and “[n]o change in practice is intended.” The NewRule 12places the oldRule 12(b)(2)atRule 12(b)(3)(B). Accordingly, even though the parties and cases cite oldRule 12(b)(2), the court will refer to the operative rule asRule 12(b)(3)(B).
According to the Indictment, CCA, an entity co-owned by Defendant Grass, used the money to pay off company debts and to purchase an eighty-three acre parcel of land located in Fairview Township, York County, Pennsylvania. (SeeIndictment, Count 1 at ¶¶ 18–22.)
The Bill of Particulars does not specify what are Chase Manhattan and Dauphin Deposit’s lost income and expenses. It does not specify what the amount of those losses are and when they occurred. The Government’s brief in opposition to the instant motion, however, makes clear that these allegations refer to routine expenses and lost income as a result of the transfer of the money. (SeeGovt. Br. in Opp. Defs. Renewed Mot. to Dis. at 10 (“The United States intends to prove that thesefinancialinstitutions lost income, particularly in the form of interest earnings, and incurred expenses as a result of the transfers listed as to each count. This is an adverse effect on suchfinancialinstitutions.”).)
InEsterman,the court pointed out that the term “affecting afinancialinstitution” appears in various other provisions of the United States Criminal Code and Sentencing Guidelines. Therefore, cases interpreting that phrase in these other contexts are equally applicable in interpreting that phrase as it appears in§ 982(a)(2)(A).
Whether afrauddoes or does not “affect afinancialinstitution” is a recurring consideration in federal criminal jurisprudence—that phrase makes a difference not only underSection 982(a)(2)(A)but also in statute of limitations terms under Sections 3282 and 3293(2) (under the latter statute, the normal statute of limitations is doubled “if the [wirefraud] offense affects afinancialinstitution”), and the phrase also bears upon the classification of certain offenses for sentencing purposes and Sentencing Guideline considerations.
135 F.Supp.2d at 919.Accordingly, the court will cite cases interpreting this phrase in other contexts throughout this memorandum.
Tellingly, the Government does not cite a single case in support of its novel interpretation of the phrase “affecting afinancialinstitution.”
The Sixth Circuit, however, vacated the sentence on other grounds.See
id.at 397(vacating the sentence because the District Court violatedFederal Rule of Criminal Procedure 32(c)(1)by failing to explain factual findings relating to its determination that Monus derived more than $1 million from hisfraud).
This provision now appears in the Sentencing Guidelines at§ 2F1.1(b)(8)(B).
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