The opinion of the court was delivered by: MUNSON
Defendants are charged, inter alia, with twelve counts of major fraud against the government for allegedly submitting false and fraudulent invoices to the Army. In the instant motion defendants seek dismissal of these counts on the ground that they are multiplicitous. The court heard oral argument on September 18, 1995, at Syracuse, New York. The following constitutes the court's Memorandum-Decision and Order.
Defendants Robert Wiehl, Sharon A. Connor and Roger Cramp are Chief Financial Officer, Supervisor of Marketing Administration and Manager of Manufacturing, respectively, for Lipe-Rollway Corporation. Indictment, Document ("Doc.") 1, at 2. Rollway Bearing, a division of Lipe-Rollway, manufactures roller bearings for military and commercial customers. In August 1990, the government awarded a prime contract to Lipe-Rollway for the production of 3,275 roller bearings for use in Army helicopters, at a cost of $ 930,034.50. Id. at 3. Under the terms of the contract, Lipe-Rollway was required to deliver the first 400 roller bearings 570 days from the date the contract was executed. The contract also required production of a single prototype roller bearing for inspection and testing by the Army prior to full-scale production.
In November 1990, the Army agreed to Lipe-Rollway's request to modify the contract by waiving the prototype requirement. Id. at 3. The modification included a stepped-up schedule requiring delivery to commence on May 26, 1991. Defendants revised internal production schedules, notified contract vendors, and purchased raw materials to meet the new production delivery schedule.
In January 1991, the Army asked Lipe-Rollway to expedite production and make the first delivery of roller bearings before May 26. Id. at 4. From January through April 1991, defendants negotiated with the Army over additional costs defendants claimed were necessary to meet the stepped-up delivery schedule. On April 22, 1991, a second contract modification was executed requiring Lipe-Rollway to deliver 400 roller bearings on or before May 20, 1991. Id. at 4. The Army agreed to pay an additional $ 353,176, an amount defendants claimed was necessary to meet the accelerated delivery schedule. In return, Lipe-Rollway was required to submit proposed cost modifications to the Army. The contract also required Lipe-Rollway to submit a "Defense Form 250, Material Inspection and Receiving Report," ("invoice") for payment. Id. at 5, 10-11.
It is alleged that defendants conspired to defraud the government by submitting inflated invoices to the Army. As part of the scheme, defendants allegedly obtained and used false Lipe-Rollway overtime labor cost estimates and false vendor quotes to support their request for additional money. Id. at 6. Defendant Connor falsely stated to Army representatives that certain vendors were charging Lipe-Rollway premium costs to place Lipe-Rollway's contract ahead of others. Id. at 9. Connor negotiated a lower packaging cost with one of the vendors, but concealed this fact from the Army when she submitted a cost estimate for the modification of the contract. Id. at 9. It is further alleged that prior to execution of the second contract modification defendant Wiehl directed Lipe-Rollway employees to stop delivery and conceal from Army representatives about 400 fully assembled roller bearings that were ready for inspection and shipping. Id. at 9.
In count one of the indictment, the government contends that the above acts constitute a willful conspiracy by defendants to defraud the government, in violation of 18 U.S.C. § 371. Id. at 5.
Defendants are charged in counts 4 through 15 of the indictment with attempting to execute major fraud against the government in violation of 18 U.S.C. § 1031, commonly known as the Major Fraud Act. They allegedly used false and fraudulent estimates of overtime labor and outside vendor costs that they claimed were necessary to meet a stepped-up delivery schedule under the contract, and by billing the Army for those expenses. Id. at 13-17. Counts 4 through 15 specifically charge defendants with submitting 12 invoices between April 30 and November 4, 1991 to the Army seeking payment under the contract. Id. at 13-17 See also Exhibit ("Exh.") B, attached to Defendant ("Def.") Connor's Notice of Motion, Doc. 13.
Lastly, defendants are charged in counts 16-25 with mail fraud for their use of the mails in furtherance of the alleged scheme to defraud the government. Indictment, Doc. 1, at 17-19.
The court turns to the merits of defendants' motion seeking dismissal of counts 4-15 of the indictment on the ground that they are multiplicitous.
"Multiplicity" is the charging of a single offense in more than one count. "The multiplicity doctrine is based upon the double jeopardy clause of the Fifth Amendment, which 'assur[es] that the court does not exceed its legislative authorization by imposing multiple punishments for the same offense.'" United States v. Fiore, 821 F.2d 127, 130 (2d Cir. 1987) (quoting Brown v. Ohio, 432 U.S. 161, 165, 53 L. Ed. 2d 187, 97 S. Ct. 2221 (1977)). In addition to the double jeopardy problem, the evil in charging a single offense in more than one count is that it may create the impression of more criminal activity on the part of the defendants than in fact may have occurred. See 1 Charles A. Wright, Federal practice and Procedure: Criminal, § 142 (1982). With regard to the major fraud statute in Particular, a multiplicitous indictment also subjects the defendants to a substantially greater monetary penalty. The major fraud statute provides for a possible fine of $ 1 million for each execution of a scheme to defraud, with a maximum fine not exceeding $ 10 million for multiple counts. 18 U.S.C. § 1031(a) and (c).
The government argues that under the major fraud statute multiple acts in execution of a single fraud scheme may be charged as separate offenses. Thus, on the facts before the court each submission of a fraudulent invoice by defendants in a scheme to defraud the Army may be charged as a separate offense. In support, the government relies on two district court cases in this circuit that rejected multiplicity challenges under the major fraud statute. Also, the government claims that the plain language of the statute and its legislative history unambiguously shows that multiple acts in execution of a single major fraud scheme may be charged as separate offenses.
Defendants do not dispute that multiple violations of the major fraud statute may be charged for multiple executions of a single scheme, but contend that the statute does not punish discrete acts in carrying out the execution of a scheme. Def. Connor's Memorandum ("Mem.") of Law, Doc. 14, at 4. According to defendants, the indictment "describes a single alleged scheme to defraud, and twelve clerical [and] administrative acts in furtherance of the scheme." Id. at 5.
The instant motion presents the court with two issues. First, the court must decide whether the major fraud statute punishes multiple acts done in furtherance of a scheme to defraud the government, or whether it only seeks to punish each execution of a scheme. Secondly, once the appropriate unit of prosecution has been determined, the court must determine whether the indictment charging defendants with one count of major fraud for each submission of an invoice to the government is multiplicitous. The court to addresses these issues in turn.
i. Plain language and legislative history of Major Fraud Act
Whether an indictment is multiplicitous is largely a question of statutory construction. See United States v. DeStafano, 429 F.2d 344, 348 (2d Cir. 1970) (citing Callanan v. United States, 364 U.S. 587, 5 L. Ed. 2d 312, 81 S. Ct. 321 (1961), cert. denied, 402 U.S. 972 (1971)). The government contends that both the plain language of the major fraud statute and its legislative history show that multiple acts in execution of a single major fraud scheme may be charged as separate offenses. Government's ("Gov.") Opposition to Def. Connor's Motion to Dismiss, Doc. 16, at 6-8.
The Major Fraud Act, provides in relevant part:
(a) Whoever knowingly executes, or attempts to execute, any scheme or ...