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U.S. v. KLEIN

May 27, 2004.

UNITED STATES OF AMERICA, -against- DAVID KLEIN, ISAAC DAYAN, and PINHAS BEN-ARI, Defendants


The opinion of the court was delivered by: HAROLD BAER, Jr., District Judge

OPINION & ORDER

Defendants David Klein, Isaac Dayan, and Pinhas Ben-Ari*fn1 move pursuant to Federal Rules of Criminal Procedure ("Fed.R. Cr. P.") 7(f) and 12(b) for an order that, inter alia, dismisses Count Two of the indictment on the grounds that it is impermissibly vague and duplicitous.*fn2 For the reasons set forth below, the defendants' motion is denied.

I. BACKGROUND

  Defendants Klein, Dayan, and Ben-Ari — owners and/or operators of diamond businesses in Manhattan's "Diamond District"*fn3 — have been indicted for conspiracy to commit bank fraud, in violation of 18 U.S.C. § 371 and 1344(2),*fn4 and bank fraud, in violation of 18 U.S.C. § 1344(2).*fn5 According to the allegations contained in the indictment, from at least January 2000 to April 2001, the defendants and co-conspirators agreed to exchange and did, in fact, exchange a large number of checks with a combined face value of tens of millions of dollars amongst their various businesses. These checks were purportedly legitimate payments for purchases, but are alleged to have been mere transfers of funds between the defendants and their businesses, which were orchestrated to artificially inflate their bank account balances and/or sales figures to falsely maintain, renew, and increase lines of credit for their businesses. The defendants allegedly set up triangles or multi-point exchanges to conceal their illegal activity. Not too surprisingly, the Government alleges that the agreement and exchange of these checks constituted a scheme to defraud financial institutions, including the Commercial Bank of New York, The Merchants Bank of New York, North Fork Bank, HSBC Bank, and Fleet National Bank.

  The Government filed a sealed complaint against defendants on October 9, 2004, at which time Magistrate Judge Dolinger issued bench warrants for their arrest. A Grand Jury returned a true bill against the three defendants on December 15, 2004. The defendants were arraigned on December 17, 2004, at which time they pleaded not guilty to the charges against them. Thereafter, the defendants filed the instant motion to dismiss and the Court held oral argument on March 12 and 15, 2004.

  II. DISCUSSION

  The defendants move to dismiss Count Two of the Indictment — the substantive bank fraud charge against all three defendants — on the grounds that it is impermissibly vague and duplicitous. I address the defendants' arguments seriatim, although the two challenges substantially overlap to the extent that they both are grounded on the alleged lack of particularity.

 A. Vagueness

  Defendants first contend that Count Two*fn6 is deficient because its lack of particularity constitutes constitutionally inadequate notice. Specifically, the defendants argue that Count Two does not identify the checks alleged to be fraudulent, by whom and to whom the checks were drafted, upon which accounts they were drawn, how precisely the checks were allegedly fraudulent, and which financial institutions were allegedly victimized as a result. There is, however, no requirement under Second Circuit case law that the indictment provide such detail. See United States v. Stavroulakis, 952 F.2d 686, 693 (2d Cir. 1992). Indeed, pursuant to Fed.R.Cr.P. 7(c), an indictment "must be a plain, concise, and definite written statement of the essential facts constituting the offense charged." Therefore, under Second Circuit law, "an indictment need do little more than to track the language of the statute charged and state the time and place (in approximate terms) of the alleged crime." Stavroulakis, 952 F.2d at 693 (internal quotation marks and citation omitted); see also United States v. Zandstra, No. 00 Cr. 209, 2000 WL 1368050, at *3 (S.D.N.Y. Sept. 20, 2000) (holding that a mail fraud count was sufficient where it tracked the statutory language, alleged a use of the mails, and identified the approximate time frame and nature of the scheme).

  These minimal requirements reflect the fact that an indictment's essential purpose is to inform the defendant of the charges levied against him. See United States v. Russell, 369 U.S. 749, 767 (1962); United States v. Dhinsa, 243 F.3d 635, 667 (2d Cir. 2001). Therefore, "an indictment is sufficient if it, first, contains the elements of the offense charged and fairly informs a defendant of the charge against which he must defend, and, second, enables him to plead an acquittal or conviction in bar of future prosecutions for the same offense." Hamling v. United States, 418 U.S. 87, 117 (1974). Count Two of the indictment comports with these basic requirements. The charging language tracks the statutory language and identifies the basic nature and object, as well as the approximate timeframe and location, of the alleged scheme to defraud. The language in the count further identifies a few of the financial institutions allegedly defrauded as a result. The Second Circuit has upheld indictments that presented substantially the same categories of information. E.g., United States v. Alfonso, 143 F.3d 772, 776 (2d Cir. 1998); Stavroulakis, 952 F.2d at 693-94.

  The defendants, however, insist that the indictment must "descend to particulars" and provide significantly greater detail. This proposition is firmly rooted, but inapplicable to this case. Courts have required a greater degree of particularity "where the definition of an offence, whether it be at common law or by statute, includes generic terms," and the indictment therefore "must state the species" of the offense. United States v. Cruikshank, 92 U.S. 542, 544 (1875). This admonishment, however, has surfaced in cases where the defendant was unable to ascertain the nature of the offense alleged. For example, in United States v. Russell, 369 U.S. 749 (1962), the defendant was charged with refusing to answer questions posed by a Senate subcommittee. The Supreme Court held that the indictment was constitutionally deficient because it failed to identify the subject matter of the congressional inquiry and "[a]t every stage of the ensuing criminal proceedings [defendant] was met with a different theory, or by no theory at all, as to what the topic had been." Id. at 768. The indictment utterly failed to inform the defendant of the charges against him and "left the prosecution free to roam at large — to shift its theory of criminality so as to take advantage of each passing vicissitude of the trial and appeal." Id. Under these circumstances, the Court was equally unable to determine whether the defendant's conviction was valid, i.e., whether he refused to answer questions that pertained to the subject of the congressional inquiry. Id. at 755, 768-69.

  In United States v. Pirro, the Second Circuit upheld the dismissal of an indictment that charged the defendant with having made a false material statement in connection with a federal income tax return pursuant to 26 U.S.C. § 7206(1). The Circuit held that indictment was flawed because it failed to plead "the crucial background fact that g[ave] rise to the duty to disclose the fact that was omitted." 212 F.2d 86, 93 (2d Cir. 2000). This information was of critical importance because "[o]nly the omission of facts required to be reported constitutes a material falsehood." Id. Without these details, the defendant "was not adequately informed of the nature of the accusation against him . . . [and] the grand jury may not have understood the elements of the crime and the evidence necessary to support the indictment." Id. at 95.

  In both of these cases, the indictments omitted a material element of the crime charged, which left a definite uncertainty as to both the nature of the offense and whether the conduct at issue was criminal. The same cannot be said of Count Two in this indictment, which pleads all of the necessary elements of the offense and provides a brief description of the nature of the bank fraud scheme, including the applicable timeframe, location, method, object, and some of the alleged participants and victims. This language, together with the allegations in the conspiracy count and the complaint, see United States v. Sturvidant, 244 F.3d 71, 77 (2d Cir. 2001), give the defendants more than an adequate indication of the nature of the crime charged. See, e.g., United States v. Reddy, No. S3 01 Cr. 58, 2002 WL 1334823, at *6 (S.D.N.Y. June 18, 2002) (rejecting defendant's specificity argument because there was no ambiguity regarding a material element of the offense and the indictment alleged the manner in which the defendant supposedly defrauded the victim, his mental state, and the appropriate statute).

  The defendants' claims are certainly not new; indeed, courts in this District have long rejected precisely this type of challenge. See, e.g., United States v. Sullivan, No. S1 02 Cr. 1144, 2004 WL 253316, at *3 (S.D.N.Y. Feb 10, 2004) (observing that "[t]here is no precedent that requires that indictments identify each and every statement the Government might argue at trial is false"); Zandstra, 2000 WL 1368050, at *4 (noting that the mail fraud count need not identify the victims of the scheme, the precise mailing dates, or the specific misrepresentations alleged to be fraudulent); United States v. Rufolo, No. 89 Cr. 938, 1990 WL 29425, at *3 (S.D.N.Y. March 13, 1990) (rejecting defendant's argument that the indictment was insufficient because it failed to allege the number, dates, nature, and amount of allegedly false expense claims).*fn7 They do not, however, compel dismissal of Count Two. The defendants' argument that some of the terminology within Count Two is ambiguous, such as the allegation that defendants "artificially inflated" account balances, is similarly unavailing. It is firmly established that "common sense must control," Stavroulakis, 952 F.2d at 693, and therefore, language in an indictment is to be given its common and ordinary meaning and "must be read to include facts which are ...


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