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UNITED STATES v. LAGRUA

November 13, 1995

UNITED STATES OF AMERICA, against KENNETH ASHLEY and FRANK LAGRUA, Defendants.


The opinion of the court was delivered by: HURLEY

 HURLEY, District Judge

 Presently before the Court are motions by Defendant Kenneth Ashley ("Ashley") and Defendant Frank LaGrua ("LaGrua") (collectively, "Defendants") to dismiss or sever various counts of a Superseding Indictment that was filed in April 1995 ("the Indictment"). Defendants also have moved for discovery of specified documents. For the reasons indicated below, the Court grants Ashley's motion to dismiss Counts (6) and Seven (7), and his motion to sever Counts (8) and (9). Defendants' discovery motions are denied.

 BACKGROUND

 The Federal Home Loan Mortgage Corporation ("Freddie Mac") "was a corporation . . . created by Congress to develop a secondary mortgage market for conventional residential loans." (Indictment P 1.) "As such, Freddie Mac purchased conventional mortgage loans from approved mortgage sellers." (Id.) Ashley was the President of Liberty Mortgage Banking Limited ("Liberty"), a corporation licensed by the State of New York as a mortgage bank, and LaGrua was its Sales Manager. (PP 2, 7-8.) The Indictment alleges that Liberty was an approved Freddie Mac mortgage seller from 1987 until mid-October, 1990. *fn1" (See id. PP 3, 52.)

 The Indictment alleges, inter alia, that Defendants devised a scheme to defraud Freddie Mac (hereinafter the "Freddie Mac Scheme"). In connection with the alleged Freddie Mac Scheme, Defendants are charged with conspiracy to commit wire fraud, and with the substantive crime of wire fraud. The Indictment also alleges that Ashley devised a scheme to defraud National Westminster Bank, N.A. ("NatWest"), a federally-insured financial institution (hereinafter the "NatWest Scheme"), and that he and unnamed others devised a scheme to defraud First Penn Bank ("First Penn"), also a federally-insured financial institution (hereinafter the "First Penn Scheme"). Ashley is charged with wire fraud in connection with the alleged NatWest Scheme and with conspiracy and bank fraud in connection with the alleged First Penn Scheme. Further, the Indictment charges Defendants with conspiring to commit perjury and suborning perjury in connection with depositions in the Liberty Civil Case. Finally, LaGrua is charged with perjury in connection with his deposition testimony in the Liberty Civil Case.

 LaGrua has moved to dismiss each count of the Indictment that names him as a defendant. In the alternative, he has moved for severance of his trial from Ashley's and asks that the Government be directed to provide pre-trial disclosure of specified documents. Further, LaGrua moves for an Order compelling the Government to provide immediate notice of "other act" evidence.

 Ashley has moved to have his trial on the perjury charges and the charges relating to the alleged Freddie Mac Scheme severed from his trial on the remaining charges against him. Further, Ashley has moved to dismiss Counts Six (6) and Seven (7) of the Indictment, which relate to the alleged NatWest Scheme. Ashley has also moved for an Order directing the Government to produce certain specified documents. Finally, Ashley requests "leave to join in all motions of his co-defendant as they may apply to Ashley."

 As a preliminary matter, the Court notes that the Government does not oppose Ashley's request to join in the motions of LaGrua to the extent that those motions inure to Ashley's benefit; the Court hereby grants that request by Ashley. As to the remaining motions by Defendants, the Court first considers their motions to dismiss, secondly their severance motions, and finally, Defendants' discovery motions.

 DISCUSSION

 I. Motion, to Dismiss Indictment

 Federal Rule of Criminal Procedure 7(c)(1) provides, in relevant part, as follows:

 
The indictment . . . shall be a plain, concise and definite written statement of the essential facts constituting the offense charged. It shall be signed by an attorney for the government. It need not contain a formal commencement, a formal conclusion or any other matter not necessary to such statement. Allegations made in one count may be incorporated by reference in another count. It may be alleged in a single count that the means by which the defendant committed the offense are unknown or that the defendant committed it by one or more specified means. The indictment . . . shall state for each count the official or customary citation of the statute, rule, regulation or other provision of law which the defendant is alleged therein to have violated.

 Fed. R. Crim. P. 7(c)(1).

 This rule performs three constitutional functions: (1) pursuant to the Sixth Amendment, it insures that the defendant is informed of the "nature and cause of the accusation;" (2) pursuant to the Fifth Amendment, it prevents any person from being "subject for the same offense to be twice put in jeopardy of life or limb;" and (3) pursuant to the Fifth Amendment, it prevents a defendant from being held "to answer for a capital or otherwise infamous crime unless on a presentment or indictment of a Grand Jury." United States v. Upton, 856 F. Supp. 727, 738 (E.D.N.Y. 1994) (citations omitted).

 "An indictment is sufficient when it charges a crime with sufficient precision to inform the defendant of the charges he must meet and with enough detail that he may plead double jeopardy in a future prosecution based on the same set of events." United States v. Stavroulakis, 952 F.2d 686, 693 (2d Cir.), cert. denied, 504 U.S. 926, 118 L. Ed. 2d 580, 112 S. Ct. 1982 (1992) (citing Russell v. United States, 369 U.S. 749, 763-64, 8 L. Ed. 2d 240, 82 S. Ct. 1038 (1962) and United States v. Tramunti, 513 F.2d 1087, 1113 (2d Cir.) ("An indictment need only provide sufficient detail to assure against double jeopardy and state the elements of the offense charged, thereby apprising the defendant of what he must be prepared to meet.") (citation omitted), cert. denied, 423 U.S. 832, 46 L. Ed. 2d 50, 96 S. Ct. 54, 96 S. Ct. 55 (1975)).

 A. Count One (1)

 Count One (1) of the Indictment charges Defendants with conspiracy in connection with the alleged Freddie Mac Scheme. 18 U.S.C. § 371 ("Section 371"); 18 U.S.C. § 3551 (Sentencing Reform Act of 1984).

 The conspiracy statute, Section 371, provides in pertinent part as follows:

 
If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined . . . or imprisoned . . . or both.

 18 U.S.C. § 371.

 Section 371 prohibits two types of conspiracies: a conspiracy "to commit any offense against the United States;" and a conspiracy "to defraud the United States, or any agency thereof." See, e.g., United States v. Rosenblatt, 554 F.2d 36, 40 (2d Cir. 1977). The Government has not alleged that Freddie Mac is an agency of the United States within the purview of Section 371. Thus, the issue presently before the Court as to Count One (1) is whether or not it sufficiently charges a conspiracy to commit an offense against the United States.

 "It has long been established that the words 'offense against the United States' encompass all offenses against the laws of the United States, not just offenses directed at the United States as target or victim." United States v. Gibson, 881 F.2d 318, 321 (6th Cir. 1989) (emphasis added) (citing Radin v. United States, 189 F. 568, [571] (2d Cir. 1911)) (further citations omitted); see also United States v. Brandon, 17 F.3d 409, 422 (1st Cir.), cert. denied, 115 S. Ct. 80 (1994). Wire fraud is prohibited by a law of the United States. See 18 U.S.C. § 1343 ("Section 1343"). Thus, a conspiracy to commit wire fraud is prohibited by Section 371. See, e.g., United States v. Piervinanzi, 23 F.3d 670, 674 (2d Cir.), cert. denied, 115 S. Ct. 259 (1994).

 The federal wire fraud statute, Section 1343, provides as follows:

 
Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than five years, or both. If the violation affects a financial institution, such person shall be fined not more than $ 1,000,000 or imprisoned not more than 30 years, or both.

 18 U.S.C. § 1343.

 Count One (1) of the Indictment alleges, inter alia, as follows:

 
In or about and between March of 1990 and December of 1992, both dates being approximate and inclusive, within the Eastern District of New York and elsewhere, the defendants KENNETH ASHLEY and FRANK LAGRUA and others did knowingly and willfully conspire to devise a scheme and artifice to defraud Freddie Mac and to obtain money and property from Freddie Mac by means of false and fraudulent pretenses, representations and promises, and for the purpose of executing said scheme and artifice caused to be transmitted, by means of wire in interstate commerce, writings, signs and signals, in violation of Title 18, United States Code, Section 1343.

 (Indictment P 12.) Details as to the alleged scheme and conspiracy are then provided. (See id. PP 13-23.) Further, the Indictment specifies eight (8) overt acts that it is alleged were committed by Defendants and their co-conspirators in furtherance of their conspiracy to commit wire fraud. (See id. P 23.)

 "The Supreme Court has held that . . . a [conspiracy] count need only 'identify the offense which the defendants conspired to commit . . .', and that it need not 'with technical precision, state all the elements essential to the commission of the [substantive] crimes . . .'" United States v. Messina, 481 F.2d 878, 880 (2d Cir.) (quoting Williamson v. United States, 207 U.S. 425, 447, 52 L. Ed. 278, 28 S. Ct. 163 (1908)), cert. denied, 414 U.S. 974 (1973); see also United States v. Mitchell, 372 F. Supp. 1239, 1253 (S.D.N.Y.) ("An indictment charging the essential elements of a conspiracy need not allege with particularity the means by which the substantive crime alleged to be the object of the conspiracy was to be accomplished.") (citations omitted), appeal dismissed, 485 F.2d 1290 (2d Cir. 1973). Count One (1) of the Indictment clearly identifies that Defendants are charged with conspiracy to commit wire fraud.

 Further, it is clear from a juxtapositioning of Count One (1) against Section 371 that it tracks the language of the statute charged and states the approximate time and place of the alleged crime. See Stavroulakis, 952 F.2d at 692. Additionally, Count One (1), (see Indictment PP 13-23), provides specific facts regarding the alleged conspiracy. See United States v. De Sapio, 299 F. Supp. 436, 444-45 (S.D.N.Y. 1969); see also Upton, 856 F. Supp. at 740. In short, the Indictment charges a conspiracy by Defendants and unnamed others to commit wire fraud, in violation of Section 371, "with sufficient precision to inform the defendant[s] of the charges they must meet and with enough detail that they may plead double jeopardy in a future prosecution based on the same set of events." See Stavroulakis, 952 F.2d at 692; see also United States v. Bonanno, 177 F. Supp. 106, 113 (S.D.N.Y. 1959) ("In effect, it is merely necessary that the elements of a conspiracy be set forth with sufficient particularity for the defendants to understand what they are charged with having conspired to do."). Thus, the Court denies Defendants' motions to dismiss Count One (1) of the Indictment. *fn2"

 B. Counts Two (2) through Five (5)

 Counts Two (2) through Five (5) charge Defendants with the substantive crime of wire fraud in connection with the alleged Freddie Mac Scheme. 18 U.S.C. § 1343; 18 U.S.C. § 2 (federal aiding and abetting statute); 18 U.S.C. § 3551. These counts allege, in part, as follows:

 
On or about the dates set forth below, all dates being approximate, within the Eastern District of New York and elsewhere, the defendants listed below and others, having devised a scheme and artifice to defraud Freddie Mac and to obtain money by means of false and fraudulent pretenses, representations and promises, for the purpose of executing such scheme and artifice and attempting to do so, caused to be transmitted by means of wire communications in interstate commerce, signs, signals and sounds, to wit: wire transfers of cash and negotiable securities from Freddie Mac to Liberty in payment for mortgage loans . . . .

 (Indictment P 25.) The Indictment provides specific facts -- names of Defendants, loan numbers, and approximate dates -- as to four (4) such wire transfers. (Id. P 28.) Finally, these counts incorporate, by express reference, (see id. P 24), details as to the alleged Freddie Mac Scheme. (See id. PP 13-23.)

 
Again, Section 1343 provides as follows:

 18 U.S.C. § 1343.

 "Although largely overlapping, a scheme to defraud, and a scheme to obtain money by means of false or fraudulent pretenses, representations, or promises, are separate offenses." United States v. Cronic, 900 F.2d 1511, 1513 (10th Cir. 1990) (mail fraud) (collecting cases); United States v. Clausen, 792 F.2d 102, 104 (8th Cir.) ("Courts have construed . . . [Section 1343] to forbid both schemes to defraud, whether or not any specific misrepresentations are involved, and schemes to obtain money or property by means of false or fraudulent pretenses, representations, or promises.") (emphases in original) (collecting cases), cert. denied, 479 U.S. 858, 93 L. Ed. 2d 133, 107 S. Ct. 202 (1986); see also United States v. Margiotta, 688 F.2d 108, 121 (2d Cir. 1982) ("The prohibition against schemes or artifices to defraud is properly interpreted to be independent of the clause 'for obtaining money or property.'") (mail fraud) (citations omitted), cert. denied, 461 U.S. 913, 77 L. Ed. 2d 282, 103 S. Ct. 1891 (1983).

 To properly allege wire fraud vis-a-vis a scheme to defraud, the Government must demonstrate (1) a scheme to defraud; (2) to obtain money or property; and (3) use of the interstate wires to further the scheme. See United States v. Teyibo, 877 F. Supp. 846, 860 (S.D.N.Y. 1995) (citations omitted). The offense of such a scheme "focuses on the intended end result." Cronic, 900 F.2d at 1513. In contrast, to properly allege wire fraud vis-a-vis a scheme to obtain money, the Government, rather than demonstrate a scheme to defraud, must show false or fraudulent pretenses, representations or promises. See id. at 1514. The focus in a scheme to obtain money is on the means by which the money was to be obtained. See id. As discussed below, the Court finds that Counts Two (2) through Five (5) sufficiently charge Defendants with both a scheme to defraud and a scheme to obtain money by false or fraudulent pretenses, representations, or promises.

 A juxtapositioning of these counts against Section 1343, see supra at 11, reveals that not only do they track the language of the statute charged and state the time and place (in approximate terms) of the alleged crimes, see Stavroulakis, 952 F.2d at 692, but they also provide "facts and circumstances as will inform the accused of the specific offence[s] coming under the general description, with which they . . . [are] charged." See Upton, 856 F. Supp. at 740 (quoting Hamling v. United States, 418 U.S. 87, 117-18, 41 L. Ed. 2d 590, 94 S. Ct. 2887 (1974)).

 These facts and circumstances are as follows:

 
(1) the purpose and nature of the scheme (defrauding Freddie Mac into purchasing mortgage loans that had been obtained by means of false information);
 
(2) the means by which the objectives of the scheme were carried out (Liberty made certain promises with respect to each loan that it would sell to Freddie Mac, including that the borrower had the willingness and financial ability to pay the loan; Defendants then lined up "false borrowers" to pose as mortgage applicants and caused mortgage loan applications with supporting documents containing false information to be completed and submitted to Liberty and later sold to Freddie Mac); and
 
(3) the nature of the communications which were used to further the objectives of the scheme (four specified wire transfers).

 Notwithstanding these allegations, LaGrua argues that the wire fraud counts are insufficient in several ways. First, they do not specifically allege that he "contemplated or intended that Freddie Mac would sustain damage through a deprivation of Freddie Mac's money or property." (LaGrua Mem. Supp. at 7 (citing United States v. Schwartz, 924 F.2d 410, 420 (2d Cir. 1991) and United States v. D'Amato, 39 F.3d 1249, 1259 (2d Cir. 1994).)

 In Schwartz, the Second Circuit stated that "an essential element of the crimes of mail and wire fraud is a scheme to defraud." *fn3" 924 F.2d at 420; see also D'Amato, 39 F.3d at 1256-57. The Schwartz court continued that "to show a scheme to defraud, the government must present proof that defendants possessed a fraudulent intent." 924 F.2d at 420 (citing United States v. Starr, 816 F.2d 94, 98 (2d Cir. 1987) (emphases added)); see also D'Amato, 39 F.3d at 1257 ("Essential to a scheme to defraud is fraudulent intent.") (citations omitted). Thus, LaGrua argues that because the Indictment does not specifically allege that he contemplated or intended that Freddie Mac would be harmed, it is insufficient.

 The Government acknowledges that to obtain a conviction for wire fraud, it must prove fraudulent intent. (See Gov. Mem. Resp. at 16.) However, as the Government correctly notes, D'Amato and Schwartz did not address the sufficiency of an indictment but, rather, were concerned with the sufficiency of proof produced at trial. See D'Amato, 39 F.3d at 1256; Schwartz, 924 F.2d at 420. In other words, neither case indicated whether or not an indictment that alleges a scheme to defraud must also specifically allege fraudulent intent. *fn4"

 The Court notes that its research on this issue reveals the case of United States v. Harris, 805 F. Supp. 166 (S.D.N.Y. 1992). That court stated the following:

 
A scheme to defraud is an essential element of the crimes of mail and wire fraud, and the government must allege and plead that the defendant possessed a fraudulent intent.

 805 F. Supp. at 177. The Harris court did not cite any support for this statement, nor has Harris been cited by any court within this Circuit to suggest that a federal fraud count is insufficient unless, in addition to alleging a scheme to defraud, it specifically alleges that the defendant possessed fraudulent intent. Indeed in a recent case from the Southern District, there was no indication that such an allegation was necessary. See Teyibo, 877 F. Supp. at 860 (supra at 12). In light of the foregoing, this Court finds that the indictment at issue is not insufficient for failure to specifically allege fraudulent intent on the part of Defendants.

 Next, LaGrua asserts that the wire fraud charges fail because they do not allege that "Freddie Mac, the alleged victim, []ever received any of the false information which, as the Superseding Indictment concedes, was provided exclusively to Liberty." (LaGrua Mem. Supp. at 13 (relying on United States v. Evans, 844 F.2d 36 (2d Cir. 1988).) LaGrua's reliance on Evans for such a proposition is misplaced, as that decision did not address the sufficiency of an indictment. Rather, Evans dealt with whether or not the Government had adequately shown a scheme to deprive it of "money or property" within the purview of the federal fraud statutes. See Evans, 844 F.2d at 39-40 (affirming dismissal of federal fraud counts). Unlike the defendant in Evans, Defendants in the case at bar do not -- and reasonably could not -- argue that the indictment at issue insufficiently alleges a scheme and artifice to defraud and to improperly obtain money or property from Freddie Mac. *fn5" In short, Evans does not support LaGrua's argument that the wire fraud charges should be dismissed. *fn6"

 Finally, LaGrua relies upon First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 767-68 (2d Cir. 1994), cert. denied, 130 L. Ed. 2d 632, 115 S. Ct. 728 (1995), to argue that the wire fraud charges fail because there is no allegation that "Freddie Mac in fact sustained an economic loss." (LaGrua Mem. Supp. at 8.) Such an assertion merits little discussion. Suffice to say, the language of Section 1343, as well as case law interpreting that section, clearly indicate that Defendants need not have been successful in their endeavor in order to be charged with wire fraud. *fn7" See United States v. Frey, 42 F.3d 795, 800 (3d Cir. 1994) ("The success of the scheme is not relevant in a mail or wire fraud conviction; it is sufficient that the defendant had the intent to defraud.") (citations omitted); United States v. Kelley, 929 F.2d 582, 585 (10th Cir.) ("The government does not have to prove that the victim suffered actual pecuniary loss from the scheme.") (bank fraud and mail fraud) (citation omitted), cert. denied, 502 U.S. 926, 116 L. Ed. 2d 280, 112 S. Ct. 341 (1991); United States v. King, 860 F.2d 54, 55 (2d Cir. 1988) ("As we have said many times, the validity of a mail fraud conviction does not hinge upon a showing of actual loss by the intended victim. . . . *fn8" It is enough that appellant knowingly devised a scheme to defraud and caused the use of the mails in furtherance of the scheme.") (citations omitted and footnote inserted), cert. denied, 490 U.S. 1065, 104 L. Ed. 2d 628, 109 S. Ct. 2062 (1989).

 In light of the above, the Court finds that the Indictment sufficiently charges Defendants with wire fraud vis-a-vis the alleged Freddie Mac Scheme; thus, the Court denies Defendants' motions to dismiss ...


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