history of the Act, the phrase "scheme or artifice" should be interpreted in the same manner as that phrase is interpreted under the mail and wire fraud statutes at 18 U.S.C. §§ 1341 and 1343 respectively, familiarity with which is assumed. See Pub. L. No. 100-700, 1988 U.S.C.C.A.N. 5975.
The controversy articulated in the context of this case arises over the terms "execute" or "attempt to execute." Defendants allege that the submission of the original settlement proposals on May 16 and August 25, 1988 constituted the final and finite actus reus of any execution or attempted execution of an alleged scheme to defraud the United States. Thus to charge them with a violation of an Act that was passed on November 15, 1988, well after the scheme was over, would unequivocally violate the Ex post facto clause. This Court disagrees.
The analysis herein must begin with the definition of the scheme as alleged in the indictment. The government has charged the defendants with knowingly devising and engaging in a scheme to defraud the United States and to obtain money and property by means of false and- fraudulent pretenses. Sup. Ind. P 71. This charge mirrors the precise wording of the Act. The government further charges that it was a part of said scheme to "submit and cause others to submit claims to TRW in connection with the [FOX] contracts . . . for payment for costs which were not actually all incurred in connection with said contracts." Sup. Ind. P 72. Essentially then the indictment charges the defendants with executing or attempting to execute a scheme to defraud the United States on the FOX contracts by obtaining remuneration from the government in excess of what it actually deserved.
Black's Law Dictionary defines the term execute as, inter alia, "to fulfill . . . the purpose of, . . . ." Black's Law Dictionary 509 (5th edition 1979). This Court shall adopt this definition of the term "execute" and hold that whatever acts taken or attempted by FEI in order to fulfill the purpose of a scheme to defraud the United States on the FOX contracts may properly be called executions of that scheme under the Major Frauds Act.
Turning to the facts at bar, upon termination, the FOX contracts required FEI to submit proposals to TRW in order for the corporation to receive payment for costs it had incurred. Should TRW accept these proposals, it would then forward the remuneration requested by FEI. Should the proposals be rejected, however, negotiations on the amount of remuneration would continue until the amounts were approved. Rejection of the original proposals generally would result in a DCAA audit of FEI's records and the submission of Certificates of Current Cost and Pricing Data invoices setting forth the amount of hours expended by FEI on each of the FOX contracts. Such Certificates would be submitted to TRW in an attempt to verify that the information provided by FEI was accurate, complete and current and to prompt TRW to proffer payment accordingly.
FEI's original proposals were rejected by TRW, thus it did not receive payment for work it alleges it had done on the FOX contracts. Further documentation was submitted thereafter in an attempt by the defendants to support the proposals and elicit payment. Negotiations with respect to the claims submitted by FEI on the FOX contracts continued up until at least April 25, 1989 when the "final settlement[s] against termination claim[s]" on the terminated contracts were submitted, and until December 13, 1988 when FEI signed restructured contracts with TRW.
Each of these submissions by FEI to TRW was reasonably calculated to fulfill the ultimate purpose of the defendants' scheme, to wit receiving undeserved monies from the government on the FOX contracts. As such, each act done in furtherance of this scheme under the definition promulgated above may properly be said to constitute a new execution or attempted execution performed in order to promote the advancement of that scheme. See United States v. Lemons, 941 F.2d 309, 318 (5th Cir. 1991) (mail and wire fraud statutes punish "each act . . . in furtherance of the scheme). Any execution in furtherance of the scheme committed after the Act was passed may properly bring the entire scheme within its criminal breadth. As the Second Circuit observed in United States v. Torres, the application of a new statute to a crime that began prior to but continued after its effective date does not violate the Ex post facto clause. See Torres, 901 F.2d 205, 227 (2d Cir. 1990).
Since executions or attempted executions with respect to the FOX contracts occurred after the enactment of the Major Frauds Act, defendants' conduct violated the Act. Any ex post facto argument then must and hereby does fail.
POINT FIVE - MAJOR FRAUDS ACT IS UNCONSTITUTIONALLY VAGUE
Defendants allege that the Major Frauds Act is unconstitutionally vague. They state that reasonable people of equal intellect may disagree as to what the terms "execute" or "attempt to execute" connote and whether they encompass "definitive act[s] of a noncontinuing nature" only. Def. Memo II at 66. This argument fails for a number of reasons.
First, it is firmly established jurisprudence that an analysis centering on the unconstitutional vagueness of a statute not involving the First Amendment must focus on the statute as applied without regard for its facial validity or lack thereof. See Chapman v. United States, 500 U.S. 453, 467, 114 L. Ed. 2d 524, 111 S. Ct. 1919 (1991); United States v. Jackson, 968 F.2d 158, 161 (2d Cir.), cert. denied, 121 L. Ed. 2d 589, 113 S. Ct. 664 (1992). Courts utilize a two-part test to determine whether the statute is vague as applied. First a court should determine if the statute "give[s] the person of ordinary intelligence a reasonable opportunity to know what is prohibited and next it may consider whether the law provides explicit standards for those who apply it." See Grayned v. City of Rockford, 408 U.S. 104, 108, 33 L. Ed. 2d 222, 92 S. Ct. 2294 (1972).
The superseding indictment in Counts Two through Five charges that the defendants executed or attempted to execute a scheme to defraud the government. Defendants do not contest the allegation that a scheme may have occurred under the definition of the Act. Rather, they question its duration as measured by the potential number of executions or attempted executions committed in furtherance of it. This argument, while interesting, does not serve to make the Act unconstitutionally vague under the Grayned test.
As noted by the government on page 67 of its original memorandum submitted in opposition to these motions, "any person who is even passably literate in English" would have an inkling that the submission of fraudulent and padded time cards in an attempt to receive excessive payments would be in violation of the Major Frauds Act. similarly, as written, the Act would not allow law enforcement officials to allege arbitrarily a violation based upon the vagueness of the terms "execution" and "attempt to execute." A single submission of a fake time card would constitute a violation of the Act in the same manner that thirty-five submissions of fake time cards would constitute thirty-five violations of the Act, so long as all of the submissions were proffered in furtherance of a common scheme to defraud. No common sense reading of the statute would intimate otherwise.
Additionally, since a statute is adjudged based upon its application, one whose conduct is "clearly proscribed" by the same may not successfully challenge it for vagueness. United States v. Nadi, 996 F.2d 548, 550 (2d Cir.), cert. denied, 126 L. Ed. 2d 311, 114 S. Ct. 347 (1993); see Village of Hoffman Estates v. The Flipside, 455 U.S. 489, 495 n.7, 71 L. Ed. 2d 362, 102 S. Ct. 1186 (1982). Under the Major Frauds Act, any execution or attempted execution of a scheme to defraud the United States constitutes a violation of the Act. As previously stated, defendants did not contest the commission of an execution of a scheme by them but rather the extent of such execution. As such, they essentially admitted at least one execution. Therefore, their conduct may properly be said to be clearly proscribed by the statute and any challenge based upon its vagueness proffered by them must and hereby does fail.
Further and independent of the above analysis, the Courts of this Circuit have sustained the validity of the Act in the face of a challenge for vagueness. See Nadi, 996 F.2d at 552.
POINT EIGHT - COUNT ONE IS DUPLICITOUS IN THAT IT CHARGES MORE THAN ONE CONSPIRACY
Defendants argue that the § 371 conspiracy charged in Count One of the superseding indictment is duplicitous in that it charges two separate and distinct conspiracies, to wit a conspiracy to defraud the government and a conspiracy to conceal and destroy time records. They further charge that Count One is defective in the way it charges a § 371 conspiracy in that it does not plead with specificity the essential nature of the fraudulent scheme the government intends to prove at trial. Finally, defendants urge that a conspiracy to defraud the government must involve more than an incidental interference with a governmental function and the same is not alleged here. Defendants' arguments are all without merit.
The general conspiracy statute codified at 18 U.S.C. § 371 makes it unlawful to conspire to defraud the United States or to commit an offense against the United States that is specifically defined by another federal statute.
18 U.S.C. § 371; see United States v. Helmsley, 941 F.2d 71, 90 (2d Cir. 1991), cert. denied, 117 L. Ed. 2d 409, 112 S. Ct. 1162 (1992). The two alternatives articulated under § 371 overlap when the object of a conspiracy to defraud the United States is also violative of a specific statutorily defined federal offense. See United States v. Nakashian, 820 F.2d 549, 553 (2d Cir.), cert. denied, 484 U.S. 963, 98 L. Ed. 2d 392, 108 S. Ct. 451 (1987); United States v. Rosenblatt, 554 F.2d 36, 40 (2d Cir. 1977).
The potential of conspiracies pled under § 371 to become licenses for veritable prosecutorial free-for-alls is evident. Judge Learned Hand called the general conspiracy statute "the darling of the modern prosecutor's nursery," and rightfully so. Harrison v. United States, 7 F.2d 259, 263 (2d Cir. 1925). The broad statutory language of a § 371 "conspiracy to defraud" in "any manner for any purpose" essentially places no restrictions upon the methods the government may charge that one utilized in order to defraud the United States. See Tanner v. United States, 483 U.S. 107, 129, 97 L. Ed. 2d 90, 107 S. Ct. 2739 (1987). These extremely expansive parameters may permit an adroit prosecutor to plead in general terms the allegations of the conspiracy, thereby avoiding the articulation of particulars while concomitantly thwarting the preparation of an adequate defense. See Dennis v. United States, 384 U.S. 855, 860, 16 L. Ed. 2d 973, 86 S. Ct. 1840 (1966); Grunewald v. United States, 353 U.S. 391, 404, 1 L. Ed. 2d 931, 77 S. Ct. 963 (1957). As a result, indictments alleging a conspiracy to defraud under § 371 are subjected to serious and careful scrutiny. See Dennis, 384 U.S. at 860.
To plead properly a § 371 conspiracy, the government must allege with specificity the particulars involved in perpetrating a conspiracy engaged in "for the purpose of impairing, obstructing or defeating the lawful function of any department of Government."
Haas v. Henkel, 216 U.S. 462, 479, 54 L. Ed. 569, 30 S. Ct. 249 (1910); see United States v. Cruikshank, 92 U.S. 542, 558, 23 L. Ed. 588 (1875). It is not sufficient merely to state that a conspiracy to defraud the United States existed. Rather the central aim of the substantive nature of the conspiracy must be elucidated. See Rosenblatt, 554 F.2d at 41.
It is axiomatic that a § 371 conspiracy may allege a conspiracy with an object that is violative of multiple statutes. Such an allegation in a criminal indictment will not be duplicative. As the Supreme Court stated in Braverman v. United States:
The allegation in a single count of a conspiracy to commit several crimes is not duplicitous, for "The conspiracy is the crime, and that is one, however diverse its objects." The single agreement is the prohibited conspiracy, and however diverse its objects it violates but a single statute.
317 U.S. 49, 54, 63 S. Ct. 99, 87 L. Ed. 2d 23 (1942) (quoting Frohwerk v. United States, 249 U.S. 204, 210, 63 L. Ed. 561, 39 S. Ct. 249 (1919)).
The defendants, while agreeing with the law articulated above, urge this Court to distinguish the aforementioned cases from the case at bar. They argue that separate conspiracies exist when each of the conspirators' agreements has its own end and each end is itself an offense, to be proven by independent and exclusive sets of facts. Blumenthal v. United States, 332 U.S. 539, 558-59, 92 L. Ed. 154, 68 S. Ct. 248 (1947). While this argument is a correct statement of the law, it is inapposite to the case at bar.
As pled in the superseding indictment, the defendants are charged in Count One with conspiring to defraud the government in violation of 18 U.S.C. § 371 by i) submitting and causing others to submit false and fictitious claims for payment against the government in violation of 18 U.S.C. § 287; and ii) knowingly and willfully attempting to disguise the falsity of such submissions by concealing material facts relevant thereto in violation of 18 U.S.C. § 1001. The mere fact that more than one offense has been committed, vis-a-vis the violation of more than one federal statute, does not in and of itself warrant a finding that more than one conspiracy existed and must have been pled.
An appropriate analogy would be to a narcotics conspiracy charge. In the case of such a charge, one count in an indictment may properly allege a conspiracy to import a controlled substance in violation of 21 U.S.C. § 963 with possession with intent to distribute and to distribute in violation of 21 U.S.C. § 841. The rationale underlying the aforementioned is that the conspiracy as pled was initiated to effect one common goal or plan.
Multiple crimes committed in furtherance of that plan may be independent in and of themselves but may still properly be considered part of one overall conspiracy.
Defendants urge this Court to follow the Ninth Circuit's ruling in United States v. Gordon and hold that the conspiracy to defraud the United States was separate and thus must be pled separately from the conspiracy to conceal the fraud. United States v. Gordon, 844 F.2d 1397, 1401 (9th Cir. 1988). The Gordon court took its cue from the Supreme Court's holding in the Grunewald case. See Grunewald v. United States, 353 U.S. 391, 405, 1 L. Ed. 2d 931, 77 S. Ct. 963 (1957). In Grunewald, the Court articulated a "vital" distinction between "acts of concealment done in furtherance of the main criminal objectives of the conspiracy, and acts of concealment done after these central objectives have been attained, for the purpose only of covering up after the crime." Id. at 974.
Although similar to the facts at bar, Gordon was decided after a full trial on the merits. The Ninth Circuit felt that the evidence elicited at trial proved that there were two separate and distinct conspiracies that existed - a conspiracy to defraud the government and a conspiracy to conceal and cover up the fraud. However, the Court of Appeals found that the conspiracy to cover up the illegal acts was formed pursuant to a separate agreement that occurred after the first conspiracy had ended." 844 F.2d at 1401 (emphasis added). This separation in time of the two conspiracies is what served to convince the courts in both Grunewald and Gordon that two distinct conspiracies existed and should have been charged separately. Id.
Such a separation has not been alleged here, and until proven at trial, may not properly serve as a ground to dismiss Count One of this indictment. In accordance with Second Circuit precedent, a single conspiracy may consist of a substantive act, the obstruction of the investigation of that act and various acts of concealment directed towards that act. See United States v. Potamitis, 739 F.2d 784, 788 (2d Cir.), cert. denied, 469 U.S. 934, 83 L. Ed. 2d 269, 105 S. Ct. 332 (1984). Such a conspiracy has been pled here.
At this juncture the Court believes that the indictment is facially valid as it charges a single, multi-objective conspiracy. As such it shall survive a motion to dismiss. Should the evidence at trial required to prove the conspiracy to defraud prove to be different from that necessary to prove the conspiracy to conceal, then the existence of two separate and distinct conspiracies may have been established and a renewal of defendants' argument may then be entertained.
Defendants' allegations that the superseding indictment does not specifically plead the nature of the conspiracy is unfounded. This Court refers them to PP 28-38 of the superseding indictment which describe the conspiracy and PP 39-69 which discuss the overt acts committed in furtherance of it.
The denial of defendants' assertions that the indictment does not allege more than an incidental interference with a governmental function is supported herein with the same amount of support this argument received in defendants' brief -- none.
POINT TEN - COUNT ONE OF THE SUPERSEDING INDICTMENT IS BARRED BY THE STATUTE OF LIMITATIONS
The statute of limitations on § 371 conspiracy claims is five years. See 18 U.S.C. § 3282. Defendants urge this Court to determine that "the only . . . pertinent events supporting the charges in the new indictment occurred prior to April 6, 1989." Def. Memo II at 48. Defendants then seek the finding that the superseding indictment repleading Count One as a § 371 conspiracy from a § 286 conspiracy broadens the charges contained in the original indictment. Therefore the filing date of the superseding indictment does not relate back to the filing of the original indictment for statute of limitations purposes. Since the superseding indictment was filed in April 6, 1994, the Court should find that any conduct committed prior to April 6, 1989 is time barred. This Court does not so find.
Vital to our sense of justice is the notion that we may not subject someone indefinitely to the threat of potential criminal punishment. Rather, certain statutory time periods have been established by the legislature to insure an individual's prompt accusation of a crime so as to place him or her on notice as expeditiously as possible that he or she may have to account for his or her actions. See United States v. Marion, 404 U.S. 307, 322-23, 30 L. Ed. 2d 468, 92 S. Ct. 455 (1971). As the Supreme Court wrote:
The purpose of a statute of limitations is to limit exposure to criminal prosecution to a certain fixed period of time following the occurrence of those acts the legislature had decided to punish by criminal sanctions. Such a limitation is designed to protect individuals from having to defend themselves against charges when the basic facts may have become obscured by the passage of time and to minimize the danger of official punishment because of acts in the far-distant past.
Toussie v. United States, 397 U.S. 112, 114, 25 L. Ed. 2d 156, 90 S. Ct. 858 (1970). Thus the government must investigate and charge within that time period or be barred forever more.
Once an indictment is brought, the statute is tolled with respect to all charges contained therein. United States v. Feinberg, 383 F.2d 60, 64-65 (2d Cir. 1967), cert. denied, 389 U.S. 1044, 19 L. Ed. 2d 836, 88 S. Ct. 788 (1968). The statute will commence again on those charges only upon the dismissal of the indictment. United States v. Grady, 544 F.2d 598, 601 (2d Cir. 1976). Any superseding indictment brought while the original indictment remains validly pending then relates back to the filing of the original indictment and is not subject to an attack on statute of limitations grounds. See United States v. Strewl, 99 F.2d 474, 477 (2d Cir. 1938), cert. denied, 306 U.S. 638, 83 L. Ed. 1039, 59 S. Ct. 489 (1939) and 332 U.S. 801 (1947). An important caveat to the above is that a superseding indictment may not "broaden or substantially amend" the charges alleged in the original indictment and have those charges withstand a statute of limitations challenge. See Grady, 544 F.2d at 602; see generally Ex parte Bain, 121 U.S. 1, 7-9, 30 L. Ed. 849, 7 S. Ct. 781 (1887).
Defendants do not contest the fact that the superseding indictment was brought while the original indictment was still validly pending. Rather, they argue that to charge a general § 371 conspiracy after the more narrow § 286 conspiracy constitutes an enhancement of the criminal conduct at issue and thus broadens impermissibly the scope of the indictment. Specifically they argue that in the superseding indictment Count One charges that each defendant conspired to make false statements to the government in violation of 18 U.S.C. § 1001, a violation not charged in the original indictment. Accordingly, the Count is subject to a valid statute of limitations challenge. Def. Memo. II at 49. This Court disagrees.
What is required of the Court when conducting a comparative analysis of two indictments is a meticulous perusal of the documents while remaining mindful of the "judicial policy favoring repose in close cases." United States v. Marion, 404 U.S. 307, 322 n. 14, 30 L. Ed. 2d 468, 92 S. Ct. 455 (1971). While repose is favored, it is not automatic. Amendments of form as opposed to substance are permissible, as are those which may be characterized as "trivial, useless, or innocuous." Stirone v. United States, 361 U.S. 212, 217, 4 L. Ed. 2d 252, 80 S. Ct. 270 (1960); See Russell v. United States, 369 U.S. 749, 770, 8 L. Ed. 2d 240, 82 S. Ct. 1038 (1962). So long as the defendants may be said to have been put on notice of the criminal acts they are alleged to have committed in order to allow them to prepare adequately a defense to the same, the protective purposes of the criminal statute of limitations will have been served.
In the instant case, the original indictment charged the defendants with a number of overt acts in furtherance of a § 286 conspiracy. Orig. Ind. PP 35-65. The superseding indictment, although it altered the first count to a § 371 conspiracy, charged the exact same overt acts using the exact same language. Sup. Ind. PP 39-69. Thus, while the classification of the conspiracy may have been altered, the conduct comprising the conspiracy did not. Further, P 29 of the original indictment charges that the defendants:
"would charge and cause others to charge labor costs to the subject Fox contracts knowing that said costs had not been incurred . . . and knowing that said false information would be furnished to the United States . . . .