United States District Court, S.D. New York
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
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.
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.
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
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 necessarily implied by the specific
allegations made," United States v. Silverman, 430 F.2d 106,
111 (2d Cir.), modified by, 439 F.2d 1198 (2d Cir. 1970). Count
Two simply does not suffer from vagueness. It comports with the
requirements of the Constitution, the Federal Rules of Criminal
Procedure, and the case law in this Circuit.
The defendants further aver that Count Two's purported lack of
specificity creates a danger of duplicity because they cannot determine
the number of executions of the scheme alleged and therefore the number
of crimes defendants are charged with having committed. Because this
challenge is premised on essentially the same ground as defendants'
vagueness challenge, it fails for substantially the same reasons.
An indictment is impermissibly duplicitous where it joins more than one
crime into a single count and thereby prejudices the defendant.
Sturdivant, 244 F.3d at 75; United States v. Aracri,
968 F.2d 1512, 1518 (2d Cir. 1992). As the Government notes, however,
Count Two alleges a single scheme to defraud. Indictment ¶
10 ("the defendants, unlawfully, willfully, and knowingly executed and
attempted to execute a scheme and artifice to defraud financial
institutions . . ."). The acts that allegedly constituted this scheme
may properly be charged in a single count, even if it was possible to
charge them separately, so long as they are part of the continuing course
of conduct. United States v. Tutino, 883 F.2d 1125, 1141 (2d
Cir. 1989); see also Zandstra, 2000 WL 1368050, at *5
(rejecting defendant's duplicity argument because the Government
appropriately pleaded each mailing as part of a single scheme to defraud
even though each mailing could have constituted a separate violation of
the statute); United States v. Weissman, No. S2 94 Cr. 760,
1996 WL 742844, at *26 (S.D.N.Y. Dec. 20, 1996) (ruling that the
indictment count was not duplicitous because "[e]ach of the acts [was]
directed at the same goal, and thus they may be seen as part of a
The cases upon which the defendants base their duplicity argument
further support this proposition. E.g., United States v. King,
200 F.3d 1207, 1212-13 (9th Cir. 1999) ("[W]hile these independent acts
probably could constitute separate offenses, Count One alleges only a
single execution of the fraudulent scheme. Thus, the indictment is not
duplicitous.") (emphasis in original); United States v. Hammen,
977 F.2d 379, 383 (9th Cir. 1992) ("[E]ach execution need not give rise
to a charge in the indictment."). The defendants argue that this type of
aggregation is permissible only where the indictment alleges sufficient
facts. This, however, is not supported by the case law. None of the cases
cited by the defendants explicitly require or even mention
the necessary degree of factual particularity. Indeed, as
discussed above, courts have routinely held that the Government is
not required to provide details simply because they constitute
the details sought by the defendants. E.g. Sullivan, 2004 WL
253316, at *3; Zandstra, 2000 WL 1368050, at *4;
Rufolo, 1990 WL 29425, at *3.
Not only is aggregate pleading permissible, it may well be desired. As
the Second Circuit has observed, any requirement that acts be pleaded
separately whenever possible could very well result in cumulative
punishment. United States v. Margiotta, 646 F.2d 729, 733 (2d
Cir. 1981); United States v. Agnese, No. 85 Cr. 1198, 1986 WL
5108, at *2 (S.D.N.Y. 1986) (holding that the policy concerns that
underlie the duplicity doctrine were not implicated because the
aggregation of multiple offenses involving the same conduct into a single
count served to limit defendant's exposure to liability); see also
United States v. Gordon, 990 F. Supp. 171, 178 (E.D.N.Y. 1998)
(same). Moreover, failure to plead a single scheme to defraud could lead
to a multiplicity challenge, i.e., that the indictment charged multiple
crimes that were in law and fact the same crime. E.g., United States
v. Harris, 79 F.3d 223, 231 (2d Cir. 1996) ("[Defendant] contends
that the six bank fraud counts, which corresponded to the six extensions
of the [loan] agreement, should have been charged as a single
count. . . ."); see also United States v. Poliak,
823 F.2d 371, 371 (9th Cir. 1987) ("[Defendant] brought a motion to
require the [G]overnment to elect or consolidate the counts arguing
the indictment was multiplicitous because it charged a single scheme
to defraud in ten separate counts.").
Even if the aggregation of the individual acts comprising the alleged
scheme were impermissible, the defendants would still have to demonstrate
prejudice to prevail on their duplicity challenge. United States v.
Murray, 618 F.2d 892, 897 (2d Cir. 1980) ("If the doctrine of duplicity is to be more than an exercise in mere formalism, it
must be invoked only when an indictment affects the [underlying] policy
considerations."). The defendants claim that they are prejudiced because
they cannot adequately determine the nature and extent of the crimes
charged and thus may not be able to interpose a plea of double jeopardy.
The defendants further argue that that the current language of Count Two
could lead to difficulties at sentencing and that there is a danger that
the jury could reach a unanimous verdict on Count Two without a unanimous
decision about which checks were fraudulent.
There is, however, no merit to any of these contentions. As discussed
above, the defendants do have constitutionally adequate notice and their
assertion that they would be unable to raise a double jeopardy claim is
simply untenable. Count Two, together with the language of the complaint
and the indictment as a whole, adequately outlines the contours of the
alleged scheme. Moreover, as I indicated in the April 14, 2004 Pre-Trial
Scheduling Order, correspondence to counsel, and on the record during
oral argument, the Government will provide the defendants with a schedule
of checks in electronic format that outlines, at minimum, the allegedly
fraudulent checks, as well as the identity of the alleged
co-conspirators, the businesses, the bank accounts, and the financial
institutions mentioned in Count Two. This will provide the defendants
with more than adequate information to prepare their defense. See
Gordon, 990 F. Supp. at 178 (ruling that defendant could not claim
lack of notice or difficulty in raising a double jeopardy claim where he
had ample access to the Government's theory of the case).
Finally, any concern about the jury's unanimity regarding the specific
checks can be cured, if the defendants so request, by a special
interrogatory, Zandstra, 2000 WL 1368050, at *5;
Weissman, 1996 WL 742844, at *26; Rufolo, 1990 WL
29425, at *3, or a special instruction regarding the unanimity
requirement for each false check, Sullivan, 2004 WL 253316, at
*5; Gordon, 990 F. Supp. at 179. The defendants' argument
regarding the impropriety of such a step is unpersuasive, for the very
case they rely upon to oppose a special interrogatory approved of
precisely this safeguard because it was to the defendant's advantage.
Margiotta, 646 F.2d at 733 (noting that while special verdicts
are generally disfavored in criminal cases, there was no reason why the
district court could not submit a special interrogatory to the jury for
the jury to identify the unanimously agreed-upon mailings with respect to
a mail fraud offense). The defendants' duplicity challenge is therefore also without merit and defendants'
motion to dismiss is denied.
For the foregoing reasons, the defendants' motion to dismiss Count Two
of the indictment is denied. The Clerk of the Court is instructed to
close this motion and any remaining open motions.
THIS CONSTITUTES THE DECISION AND ORDER OF THE COURT.