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UNITED STATES v. BERGER

September 14, 1998

UNITED STATES OF AMERICA,
v.
CHAIM BERGER, a/k/a "Herman Berger," AVRUM DAVID FRIESEL, a/k/a "David Friesel," a/k/a "Avraham Friesel," a/k/a "A. David Friesel," a/k/a "Aron Friesel," KALMEN STERN, DAVID GOLDSTEIN, JACOB ELBAUM, a/k/a "Yitzchok Elbaum," and BENJAMIN BERGER, Defendants.



The opinion of the court was delivered by: JONES

MEMORANDUM & ORDER

 BARBARA S. JONES

 UNITED STATES DISTRICT JUDGE

 Defendants are charged in a 57-count Indictment with conspiring to defraud and with defrauding the federal government of millions of dollars in federal funds. Specifically, the Indictment alleges that defendants participated in a scheme to defraud the government of student-aid Pell Grants administered by the U.S. Department of Education ("DOE") and Tuition Assistance Program ("TAP") funds administered by the New York State Department of Education, rental subsidies administered by the U.S. Department of Housing and Urban Development ("HUD"), small business funds administered by the Small Business Administration ("SBA"), and benefits administered by the Social Security Administration ("SSA"). The Indictment further alleges that defendants defrauded the Internal Revenue Service ("IRS").

 All of the defendants, except David Goldstein, are members of the Hasidic community residing in the Village of New Square, a small, incorporated village located in Rockland County, New York. The Indictment alleges that defendants individually, collectively, and through their positions in various community organizations fraudulently obtained government subsidies in order to support themselves, other members of the Hasidic community, and community institutions such as the Yeshiva of New Square.

 Pending are pretrial motions filed by defendants Kalmen Stern, Goldstein, and Benjamin Berger, on behalf of themselves and defendant Jacob Elbaum. *fn1" Defendants seek dismissal of Counts One, Two, Four, and Five on the ground that these Counts allege only violations of civil regulations, and not federal criminal statutes. Defendants further move to dismiss Count One on the ground that it is duplicitous, Count Two on the ground that it fails to properly allege theft of federal program funds as charged, and Count Five on the ground that it is barred by the statute of limitations. Additionally, David Goldstein and Benjamin Berger move for severance of the charges against them, pursuant to Rules 8(b) and 14, Federal Rules of Criminal Procedure. Finally, Goldstein moves to dismiss Counts One, Four, Five and Twenty-Two on statute of limitations grounds, and Counts Fifty-One and Fifty-Two for improper venue. *fn2"

 The government does not contest Goldstein's motion to dismiss Counts Fifty-One and Fifty-Two for improper venue. Accordingly, Goldstein's motion as to those Counts is granted. In all other respects, defendants' motions are denied.

 DISCUSSION

 A.

 Defendants' first argument is that Counts One, Two, Four, and Five should be dismissed because those counts allege only violations of regulatory schemes, rather than criminal statutes. The Court disagrees.

 Count One charges that defendants conspired to defraud the federal government and conspired to commit a wide variety of offenses, in violation of 18 U.S.C. § 371. Counts Two, Four, and Five charge that all of the defendants, except Benjamin Berger, fraudulently obtained more than $ 10 million in Pell Grant funds from the DOE, in violation of 18 U.S.C. § 666 (theft of federal program funds), 18 U.S.C. § 1343 (wire fraud), and 18 U.S.C. § 1341 (mail fraud), respectively.

 As defendants correctly point out, the government's evidence of these alleged offenses necessarily will reference various federal regulations. Thus, to prove that defendants fraudulently obtained Pell Grant funds, the government will have to prove that defendants contravened regulations promulgated by the DOE and obtained funds to which they were not entitled. Nevertheless, that the government's proof will include evidence that defendants violated federal regulations does not mean that the government's allegations fail to charge defendants with a federal crime. Put differently, if the government can prove the elements of the crimes charges, it matters not that the methods used by defendants to defraud the federal government also may have violated civil administrative regulations. See United States v. Christo, 614 F.2d 486, 490 (5th Cir. 1980).

 Here, Count One charges defendants with conspiring to defraud the government. Under section 371, a conspiracy to defraud includes "any conspiracy for the purpose of impairing, obstructing, or defeating the lawful function of any department of government." Dennis v. United States, 384 U.S. 855, 861, 16 L. Ed. 2d 973, 86 S. Ct. 1840 (1966) (quotations and citations omitted); see also United States v. Ballistrea, 101 F.3d 827, 831 (2d Cir. 1996), cert. denied, 520 U.S. 1150, 137 L. Ed. 2d 488, 117 S. Ct. 1327 (1997). Such a conspiracy "need not involve the violation of a separate statute," United States v. Rosengarten, 857 F.2d 76, 78 (2d Cir. 1988), cert. denied, 488 U.S. 1011, 102 L. Ed. 2d 790, 109 S. Ct. 799 (1989), so long as the government proves that "deceitful or dishonest means [were] employed to obstruct governmental functions," Ballistrea, 101 F.3d at 832. See also United States v. Barker Steel Co., 985 F.2d 1123, 1131 (1st Cir. 1993) (rejecting argument that conviction under section 371 requires proof of separate violations of other substantive offenses); United States v. Bucey, 876 F.2d 1297, 1312 (7th Cir.) ("In order to convict under the conspiracy to defraud clause of section 371, the government need not charge or prove that [defendant] agreed to commit, or actually did commit a substantive offense. He merely must have agreed to interfere with or obstruct one of [the government's] lawful functions by means that are dishonest." (internal quotations and citations omitted)), cert. denied, 493 U.S. 1004, 107 L. Ed. 2d 560, 110 S. Ct. 565 (1989).

 The government's allegations, as alleged in the Indictment, properly charge defendants with a conspiracy to defraud the federal government in violation of section 371. As the First Circuit explained in Barker Steel,

 
The allegations in this case do not present a situation where defendants conspired to do something which, in itself, was innocent, but which had the unintended effect of thwarting the [government] programs. Nor were the defendants engaging in open defiance or protest against the [government] programs. The defendants' actions, as alleged, involved deceit and trickery to benefit the defendants by hampering a lawful government function. A conspiracy of this kind has long been recognized to defraud the government.

 985 F.2d at 1134.

 In the same vein, Counts Two, Four and Five properly allege theft of federal program funds, mail fraud, and wire fraud, respectively. Each of these offenses entails the taking of money or property through fraudulent means. Once again, the violation of the federal regulatory scheme -- while obviously interwoven with the government's allegations -- is merely ancillary to the ultimate issue of whether the Indictment properly charges a criminal offense. Here, the government's allegations, as charged in the Indictment, sufficiently plead the elements of the charged crimes.

 Accordingly, defendants' motion to dismiss Counts One, Two, Four, and Five for failure to charge a ...


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