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UNITED STATES v. BEATTY

May 25, 1984

UNITED STATES OF AMERICA against VANDER L. BEATTY, Defendant.


The opinion of the court was delivered by: GLASSER

MEMORANDUM AND ORDER

GLASSER, United States District Judge:

 The defendant is charged in an indictment containing sixteen counts as follows: Mail Fraud in Counts 1 - 14 (18 U.S.C. §§ 1341 and 2); Racketeering in Count 15 (18 U.S.C. §§ 1962(c), 1963 and 2); Obstruction of Justice in Count 16 (18 U.S.C. §§ 1503 and 2). He has moved for an order pursuant to Rules 7, 8 and 12 dismissing Counts 1 - 14 and Count 15 in their entirety and Count 16 in part or severing a portion of Count 16; for an order pursuant to Rules 6(e)(3)(c)(i) and (ii) releasing to defendant in whole or in part the minutes of the Grand Jury that indicted him and of any other federal grand jury to which his case was presented; for an order pursuant to Rule 7(d) striking surplusage from the indictment and for an order pursuant to Rule 12(f) extending his time to make formal discovery motions. His motions will be addressed in that order.

 I.

 A. Motion to Dismiss Counts 1 -14.

 In support of his motion to dismiss these counts the defendant correctly recognizes that mail fraud consists of two elements: (1) a scheme or artiface to defraud, and (2) use of the mails for the purpose of executing the scheme. 18 U.S.C. § 1341; Pereira v. U.S., 347 U.S. 1, 8, 98 L. Ed. 435, 74 S. Ct. 358 (1954). He concedes that the indictment adequately charges the first element, but contends that it fails to adequately charge the second. In sum, he contends that the use of the mails must be part of the execution of the fraud; must be incident to an essential part of the scheme and sufficiently related to the furtherance of the scheme. The mailings charged here, he argues, do not (with the possible exception of the mailing charged in Count 7), satisfy that requirement but are instead routine transmittals or notifications from and to banks, government agencies and the Bedford Stuyvesant Urban Development Corporation (BSUDC), which are not in any way false or fraudulent. He relies primarily on Parr v. U.S., 363 U.S. 370, 4 L. Ed. 2d 1277, 80 S. Ct. 1171 (1960) and U.S. v. Tarnopol, 561 F.2d 466 (3rd Cir. 1977).

 The defendants charged with violating and conspiracy to violate the Mail Fraud Act (18 U.S.C. § 1341) in Parr were nine individuals and two banks who, together, controlled the Benavides Independent School District (the District), a public body created under Texas law. That body administered the public schools within a defined geographic area. They were charged with looting the District of some $200,000 through their control of the District's fiscal affairs. Under Texas law, the District was empowered to assess and collect an ad valorem property tax which was to be used exclusively for the maintenance of the public shcools. The defendants were charged with devising a scheme to defraud by appropriating the taxes collected to their own benefit and with using the mails to execute the scheme in that the notices and collections incident to the taxing process were sent by mail.

 In reversing the convictions of the defendants of mail fraud, the Supreme Court framed the issue as being whether the legally compelled mailings of the lawful letters, tax statements, checks and receipts complained of in those counts could properly be said to have been for the purpose of executing a scheme to defraud because the defendants, who were legally compelled to cause the mailings, planned to steal part of the receipts. 363 U.S. at 389. After recognizing the uniqueness of the factual situation, the court concluded that "mailings made or caused to be made under the imperative command of duty imposed by state law" cannot be said to be "criminal under the federal mail fraud statute, even though some of those who are so required to do the mailing for the District plan to steal, when or after received, some indefinite part of its moneys." 363 U.S. at 391. Considerations of mailings as being "routine" or "innocent" were not alluded to or mentioned by the Court.

 In Tarnopol, the mailings relied upon by the government were packing slips sent by the manufacturer of photograph records to the corporation ordering them to confirm the fact that the records were shipped to their intended recipients. The defendants, officers of the corporate purchasers, used those slips to differentiate sales properly reflected on the corporate books from sales to be included in their fraudulent scheme. In reversing the conviction of the defendants, the court said that the mailing of the packing slips was "a routine business procedure which was uniformly followed in the case of all sales, whether or not they were involved in the scheme to defraud." 561 F.2d at 472. "The procedure was itself intrinsically devoid of any element of fraud and, indeed, it or its equivalent would appear to have been necessary in the conduct of legitimate business" by the corporate purchasers with the record manufacturers. Id. "No distinction was made in this practice between sales subsequently entered on the books and those which became involved in the scheme to defraud." Id. The execution of the fraudulent scheme did not begin until after the packing slips were received and the mailing of those slips were thus deemed too remote to be in furtherance of the scheme.

 Neither Parr nor Tarnopol is applicable here. The indictment in this case, in essence, charges the defendant with causing the BSUDC to be incorporated for the purpose of obtaining monies from governmental agencies, which monies were then unlawfully diverted to his own use and to the use of others. The indictment further charges the defendant with concealing those unlawful uses. The mailings charged in Counts 1 - 14 are alleged in the indictment to be for the purpose of executing the defendant's scheme to defraud. Given the charge in this indictment that the BSUDC was created for the very purpose of obtaining money to be misappropriated, it can hardly be said the alleged mailings to execute that purpose were "made or caused to be made under the imperative command of duty imposed by law" as in Parr. Nor can it be said as in Tarnopol that the procedures (which included mailings) leading to the ultimate misappropriation of corporate funds were devoid of any element of fraud. The mail fraud counts in the indictment allege procedures and mailings which are instinct with fraud with each step in the process being an integral part of the whole. See, e.g., United States v. Elkin, 731 F.2d 1005 (2d Cir. 1984); United States v. Hasenstab, 575 F.2d 1035 (2d Cir.) cert. denied, 439 U.S. 827, 58 L. Ed. 2d 120, 99 S. Ct. 100 (1978); and United States v. Brown, 583 F.2d 659 (3rd Cir. 1978), cert. denied, 440 U.S. 909, 99 S. Ct. 1217, 59 L. Ed. 2d 456 (1979), where the court also observed, at 668 that "the relation of the mailing to the fraud is a question of fact." *fn1"

 The defendant's motion aimed at Counts 1-14 also requests that the government be directed "to re-charge the mail fraud in one count, or possibly more, but in any event in far less than 14 . . ." although conceding that "mailings can be set forth in separate counts" as reflected in Form 3 which supplements the Federal Rules of Criminal Procedure (Defendant's Memorandum of Law, pp. 16-17). At another place in his Memorandum of Law (p. 9) the defendant also concedes that "conceptually, it can be said that the gist of the crime of mail fraud is use of the mails . . . and that each mailing is a separate offense even if there is but one scheme to defraud." The defendant correctly states the law in this regard and his objection to the multiple counts of mail fraud charged in the indictment, therefore, has no merit. Badders v. United States, 240 U.S. 391, 394, 60 L. Ed. 706, 36 S. Ct. 367 (1916).

 For the foregoing reasons, the defendant's motion addressed to Counts 1 - 14 is denied.

 B. Motion to Dismiss Count 15

 The defendant moves to dismiss Count 15 for the reason that it fails to charge two or more predicate acts as required by 18 U.S.C § 1961 and that the acts charged are not acts of racketeering activity required as predicate acts.

 Count 15 of the indictment accuses the defendant of four acts of racketeering activity. Each act is alleged to be in violation of the mail fraud statute and each act relates to a different contract entered into between BSUDC and the State of New York by virtue of which BSUDC received sums of money in varying amounts from the State of New York. The first act of racketeering of which he is accused consists of four separate mailings relating to a 1979 contract between the BSUDC and the State of New York for funding through the New York State Supplemental Budget.

 The second act of racketeering of which he is accused consists of two separate mailings relating to a January 1981 contract between the BSUDC and the State of New York for funding through the Neighborhood Preservation Program.

 The third act of racketeering of which he is accused consists of two separate mailings relating to an October 1981 contract between the BSUDC and the State of New York for funding through the Neighborhood Conservation Program.

 The fourth act of racketeering of which he is accused consists of five separate mailings relating to a January 1982 contract between the BSUDC and the State of New York for funding through the Urban Initiatives Program.

 The defendant argues, in essence, that he is charged with a single scheme to defraud and consequently with a single valid predicate act of mail fraud which the government seeks to circumvent by dividing that scheme into four parts and assigning separate mailings to each, thus creating four predicate acts of racketeering activity.

 "Racketeering activity" as defined in 18 U.S.C. § 1961(1)(B) includes mail fraud. If, as has heretofore been decided and as the defendant concedes, each mailing is a separate offense, then each of the fourteen counts of mail fruad is a racketeering activity and at least two such acts would constitute a "pattern of racketeering activity" as that phrase is defined in 18 U.S.C. § 1961(5).

 The argument made by the defendant in this regard is virtually identical to the argement made by the defendant in United States v. Weatherspoon, 581 F.2d 595 (7th Cir. 1978). In rejecting the argument the court there said, at pp. 601-602, as follows:

 A "scheme to defraud" is not an "act"indictable under the mail fraud statute, for though the offense of mail fraud "has its genesis in the scheme to defraud, the very gist of [the crime] is the use of the mails in executing the scheme". . . . It is for this reason that each mailing in furtherance of a scheme to defraud is a separate offense under 18 U.S.C. § 1341 even if there is but one scheme involved. . . . Accordingly, as it is clear that the only "acts" indictable under 18 U.S.C. § 1341 are mailings in furtherance of a scheme to defraud, it follows that Weatherspoon has engaged in five acts of "racketeering activity" as defined in 18 U.S.C. § 1961(1)(B) by virtue of the fact that she committed five separate acts of mail fraud. As a consequence, she engaged in a "pattern of racketeering activity" within the meaning of 18 U.S.C. §§ 1961(5), 1962(c) because she committed two or more acts of racketeering activity. (emphasis in original) (citations omitted).

 To the same effect, see United States v. McManigal, 708 F.2d 276, 282 (7th Cir. 1983). That analysis is precisely applicable here.

 For the foregoing reasons, the defendant's motion to dismiss Count 15 of the indictment is denied.

 C. The Motion to Dismiss Count 16

 Count 16 charges the defendant with "urging, suggesting and instructing witnesses to give false and misleading testimony before the grand jury and by giving disguised and misleading handwriting exemplars in response to orders of the grand jury," in violation of 18 U.S.C. § 1503 and 18 U.S.C. § 2.

 The defendant moves to strike or dismiss this count on due process grounds or to sever it to avoid prejudice to the defendant at trial. In the alternative, the defendant moves for a copy of the grand jury minutes and of the charge before the grand jury regarding the handwriting exemplars so that he can ...


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