The opinion of the court was delivered by: LESLIE G. FOSCHIO
This matter was referred to the undersigned by the Hon. Richard J. Arcara on June 28, 1993 for disposition of all pretrial matters pursuant to 28 U.S.C. § 636(b)(1)(A) and for report and recommendation pursuant to § 636(B)(1)(B). It is presently before this court on the Defendant Gawel's motion to dismiss Counts I through VI of the Indictment. Defendant Gawel's motion for severance and for pretrial discovery, and Defendant Kaczowski's oral motion for severance are addressed in a separate Decision and Order.
The Defendants were charged, in a fourteen-count, second superseding indictment dated November 23, 1993, with violations of 18 U.S.C. §§ 2, 371, 982, 1956(a)(1)(B)(i) and (a)(1)(A)(i), 26 U.S.C. § 7206, and 42 U.S.C. § 408. In Count I, the Defendants were accused of conspiracy to violate the money laundering statute and to file false tax returns. In Counts II through V, they were charged with substantive acts of money laundering and filing false tax returns. In Count VI, both Defendants were accused of making false statements to the Social Security Administration. These counts relate to a scheme wherein Defendant Kaczowski was placed in a "no-show" job on the payroll of the "Kampus Kitchen," a game room in the City of Niagara Falls. In Count VII, Defendant Kaczowski was charged with conspiracy to commit money laundering, and in Counts VIII through XII he is charged with five counts of money laundering. These counts relate to the laundering of gambling debts by Defendant Kaczowski through the checking account of the Kampus Kitchen. Counts XIII and XIV relate to forfeiture based on the above two series of transactions.
In motion papers filed October 15, 1993, Defendant Gawel sought the severance of his trial from that of Defendant Kaczowski, dismissal of Counts I through VI of the Indictment, and pretrial discovery. The Government filed its response to the motions on November 4, 1993. At oral argument on November 18, 1993, Defendant Kaczowski made an oral motion for severance. The Government filed an Affidavit and Memorandum of Law in response to that motion on November 23, 1993. For the reasons set forth below, the motion to dismiss should be DENIED.
Count I of the Indictment alleges a conspiracy which encompasses the substantive acts of Counts II through V. It is alleged that Nicholas A. Christopher was the de facto owner of a game room and restaurant, the Kampus Kitchen, in the City of Niagara Falls, New York. See Second Superseding Indictment hereinafter "Indictment," page 2. Defendant Gawel is alleged to have been the accountant and attorney for the business, and Defendant Kaczowski is alleged to be a known "bookmaker." See Indictment, page 3, at para. 4.
The Indictment alleges that, sometime in July or August of 1988, the Defendants approached Christopher and requested that Kaczowski be put on the payroll of the Kampus Kitchen so that it would appear Kaczowski had a legitimate source of income. See Indictment, page 3, para. 5. It was agreed that Defendant Kaczowski would give Christopher cash each week, Christopher would in turn issue Kaczowski a pay check, Kaczowski would give Gawel cash, on a quarterly basis, to pay Federal and State withholding, unemployment insurance, and social security taxes, and Defendant Gawel would prepare and file the necessary tax forms on behalf of the Kampus Kitchen and Kaczowski. See Indictment, pages 3-4.
In Counts II and IV, Defendants are accused of knowingly and unlawfully conducting and attempting to conduct a financial transaction affecting interstate commerce. Specifically, Count II alleges that the Defendants, on February 17 and 18, 1989, deposited money into Defendant Gawel's escrow account and issued checks from the account payable to the Internal Revenue Service. The deposits, totalling $ 1,472.99, are alleged to represent the proceeds of unlawful activity, namely bookmaking, and the transaction, it is alleged, "was designed in whole and in part to conceal and disguise the nature, source and ownership of the proceeds of said specified unlawful activity." See Indictment, at page 8. In Count IV, the Defendants are accused of making another deposit, in the amount of $ 1,471.36, into Defendant Gawel's escrow account on August 21, 1989, and then issuing a check payable to Norstar Bank, N.A. as a Federal tax deposit.
In Count III, the Defendants are accused of preparing and filing a 1988 Federal Individual Income Tax Return, Form 1040 for Defendant Kaczowski listing "wages, salaries, tips, etc." of $ 7700 from the Kampus Kitchen, knowing that Kaczowski did not earn the money in salary from the Kampus Kitchen. In Count V, the Defendants are accused of making and filing the 1989 Federal Individual Income Tax Return, Form 1040 listing wages of $ 18,200 from the Kampus Kitchen, knowing that he had not earned such wages from employment at the Kampus Kitchen.
In Count VI, it is alleged that both Defendants caused false representations to be made to the United States Department of Health and Human Services, in that they filed Form 941 authorizing the withholding of Social Security taxes from Defendant Kaczowski's Kampus Kitchen "paychecks."
1. Dismissal of Counts II and IV.
Defendant Gawel contends that Counts II and IV, those counts relating to the deposit into escrow and issuance of checks to the Internal Revenue Service, are "facially defective" and should be dismissed pursuant to Fed.R.Crim.P. 12(b)(2). He claims that the facts alleged fail to establish that the transactions "either reflected a purpose to, or in fact did, conceal or disguise the nature of the funds ...