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United States District Court, S.D. New York

April 4, 2005.

United States, Plaintiff,
Isaac Dayan, Defendant.

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


On December 21, 2004, Defendant Isaac Dayan ("Dayan") was convicted of one count of conspiracy to commit bank fraud in violation of 18 U.S.C. § 371, and two counts of bank fraud in violation of 18 U.S.C. § 1344. Dayan now moves for judgment of acquittal pursuant to Fed.R.Crim.P. 29, or in the alternative for a new trial pursuant to Fed.R.Crim.P. 33. For the reasons stated herein, the motion is DENIED.


  On July 12, 2004, Dayan was charged with conspiracy to commit bank fraud (Count I) and three counts of bank fraud (Counts II, III, & IV) for his involvement in what the Government claimed was a check-kiting scheme between diamond dealers. A jury trial commenced on December 13, 2004 and extended to December 21, 2004. The Government produced testimony from bank officers, Dayan's accountant, and a co-conspirator, Jacob Haas, who had cooperated with the Government. The Government also introduced Dayan's bank records and identified checks made to and from Dayan's companies as well as diagrams to demonstrate his part in the direct and triangular transfers illustrating the conspiracy. Prior to the close of the Government's case, and to expedite the jury trial, the Court deemed Dayan's counsel to have moved for a judgment of acquittal and the Court reserved decision. Dayan was found guilty by the jury of Count I (Conspiracy) and Counts II and IV (Bank Fraud). Through his own testimony, Dayan admitted exchanging checks with other diamond dealers that did not represent business transactions and explained that the exchanges were done, in part, to cover overdrafts in the conspirators' accounts or checks that had been issued by the conspirators and were soon to be presented to the conspirators' banks for payment. Dayan claimed that the practice, which he called "loans and exchanges," was common in the diamond industry and known and accepted by the banks. II. APPLICABLE LEGAL STANDARD

  A. Rule 29

  When a defendant moves pursuant to Fed.R.Crim.P. 29, the district court must determine, based on all of the relevant evidence, whether a rational juror "might fairly conclude guilt beyond a reasonable doubt." United States v. Mariani, 725 F.2d 862, 865 (2d Cir. 1984) (internal quotations omitted). The district court is required to (i) draw all reasonable inferences in favor of the Government, and (ii) resolve all issues of credibility in favor of the jury's verdict. United States v. Weiss, 930 F.2d 185, 191 (2d Cir. 1991). Or put another way, to succeed on the motion, a defendant must persuade the court that, "viewing the evidence in the light most favorable to the Government, . . . no rational trier of fact could have found the essential elements of the crime charged beyond a reasonable doubt." United States v. Leslie, 103 F.3d 1093, 1100 (2d Cir. 1997). A defendant challenging the sufficiency of evidence "bears a heavy burden." United States v. Autori, 212 F.3d 105, 114 (2d Cir. 2000); United States v. Tillem, 906 F.2d 814, 821 (2d Cir. 1990) (stating that motions challenging the sufficiency of the evidence for a conviction "rarely carry the day").

  B. Rule 33

  Fed.R.Crim.P. 33 provides that "upon the defendant's motion, the court may vacate any judgment and grant a new trial if the interest of justice so requires." Fed.R.Crim.P. 33(a). It confers broad discretion upon a trial court to set aside a jury verdict and order a new trial in order to avert a perceived miscarriage of justice. United States v. Sanchez, 969 F.2d 1409, 1413 (2d Cir. 1992). A defendant seeking a new trial bears the burden of demonstrating the "essential unfairness of the [first] trial." United States ex rel. Darcy v. Handy, 351 U.S. 454, 462 (1956). In adjudicating a Rule 33 motion, a court is entitled to weigh the evidence and, in so doing, to evaluate the credibility of the witnesses. Sanchez, 969 F.2d at 1413. However, courts should only grant new trials in exceptional circumstances. Id. at 1414. "[M]otions for a new trial are disfavored in this Circuit." United States v. Gambino, 59 F.3d 353, 364 (2d Cir. 1995).


  a. Counts I and II (Conspiracy and Bank Fraud)

  Dayan moves the Court to set aside the jury's verdict and enter a judgment of acquittal or alternatively, order a new trial on Counts I and II, conspiracy to commit bank fraud and bank fraud respectively. Dayan urges that there was insufficient evidence at trial to establish that he (1) made false representations to bank officers concerning checks in his accounts, (2) knew that a purpose of the check exchanges was and did cause or permit others to seek and maintain lines of credit based on false representations, or (3) knowingly deposited worthless checks. The motions must be DENIED.

  The Bank Fraud statute, 18 U.S.C. § 1344, criminalizes participation in "a scheme or artifice 1) to defraud a financial institution; or 2) to obtain any of the money . . . owned by . . . or under the . . . control of a financial institution by means of false or fraudulent pretenses, representations, or promises." Because the statute is phrased in the disjunctive the Government need not satisfy both prongs. Under the first prong, courts have held that "a check-kiting scheme, regardless of its scale or complexity, constitutes a `scheme or artifice to defraud.'" United States v. Burnett, 10 F.3d 74, 78 (2d Cir. 1993) (citing United States v. Stone, 954 F.2d 1187, 1190 (6th Cir. 1992). The second prong requires something more than a simple check-kiting scheme, where the only falsehoods or misrepresentations are the overdraft checks themselves. Id. When the defendant's conduct exceeds the simple check-kiting scheme, or is an "embellished" check-kiting scheme, the false or fraudulent pretenses requirement of the second prong must be satisfied. While this conduct could include false statements to bank managers, it could also be the concealment of control over an account or the careful coordination of deposits to conceal the amount of money in an account during the clearing period, or the float. Id. at 79.

  First, Dayan contends the Government failed to establish that he made false representations to banks. However, the government produced evidence that Dayan's bank accounts showed checks exchanged back and forth in substantially similar amounts without the funds to cover them so as to create a "wash." In addition co-conspirator, Jacob Haas, testified in detail about the check-kiting activity and that he provided checks to Dayan that Haas did not have funds in his account to cover. For purposes of Rule 29, once the jury has rendered its verdict, the Court must construe issues of credibility in favor of the Government. United States v. Abelis, 146 F.3d 73, 80, (2d Cir. 1998). Applying this standard, as I must, there is ample evidence to support a jury's finding of guilt under either prong of § 1344.

  Second, Dayan claims there was insufficient proof at trial to establish that he knew the purpose of the check-kiting scheme was to inflate sales and to increase his line or lines of credit, yet Haas testified that the check exchanges were intended to obtain credit for the conspirators and that he told Dayan, among other things, that if he wanted to obtain increased lines of credit, he should get an accountant to prepare financial statements with inflated sales figures, and Dayan did just that. Thus, it would be reasonable for the jury to find that Dayan knew the purpose of the conspiracy was to 1) artificially inflate account balances and 2) to seek, receive, maintain, increase, and/or renew lines of credit using false figures.

  Third, Dayan argues that the Government failed to prove that Dayan "knowingly deposited worthless checks." He relies on the Second Circuit's decision in United States v. Burnett, 10 F.3d 74 (2d Cir 1993), which summarized check-kiting as involving the exchange of worthless checks for the purpose of inflating account balances for a few days. Haas' testimony demonstrates that Dayan was aware he was depositing checks into his account and that those checks were worthless. There is also evidence that Dayan knew that many of the checks he provided to his co-conspirators as part of the scheme were written on accounts that lacked sufficient funds to cover them. Dayan himself testified that he provided checks to others to help them cover overdrafts.

  Reviewing the evidence in the light most favorable to the government, I cannot set aside the jury's verdict on Counts I and II and this is so despite lingering concerns about Mr. Haas and his credibility. In short, there is precious little to warrant a new trial.

  b. Count IV (Bank Fraud)

  Dayan argues that the Government failed to offer sufficient evidence that Dayan provided false and fraudulent information to Fleet National Bank, and therefore, the Court should enter a judgment of acquittal as to the bank fraud charge in Count IV. At trial, Dayan's accountant testified that he prepared financial statements at Dayan's request and later withdrew those financial statements when he found out from Dayan that the account balances he had used to make his determination included not only sales proceeds but "loans and exchanges" which had inflated the account balances. It was these inflated statements that the defendant used to dupe the bank.

  Dayan contends that the Government never offered evidence to prove which figure was wrong, the $8,660,505 sales amount reflected in the line of credit application or the $1,500,000 in sales included in Dayan's tax return for 1999. It is enough that the accountant withdrew his financial statements upon finding that the sales figures for 1999 were inflated from "loans and exchanges." Based on the accountant's testimony and the application to Fleet which was never corrected, it was reasonable for the jury to conclude that Dayan was aware of the falsity of the application considering that he asked his accountant to prepare the financial statements specifically to get the line of credit, and knew that the statements included loans and exchanges and as such were inflated. c. Jury Instructions

  i. The Court's Instruction on "Intent to Defraud"

  In its jury instruction, the Court provided the definition of "intent to defraud" as "to act willfully with intent to deceive for the purpose of causing some financial loss or risk of financial loss to another — here, to obtain money or property from a bank without the company's informed consent." Dayan contends that this instruction was plain error because the "scheme to defraud" clause of bank fraud does not require him to inform the bank of the nature of his transactions, and there was substantial prejudice as a result of the instruction.

  Pursuant to Fed.R.Crim.P. 30, the failure to raise an objection prior to jury deliberation, as is the case here, requires the Court to review the jury charge for plain error. Fed.R.Crim.P. 30(d), 52(b). To constitute plain error, there must be error that is plain and it must "affect substantial rights," Johnson v. United States, 520 U.S. 466-67 (quoting United States v. Olano, 507 U.S. 725, 732 (1993)) meaning the defendant was prejudiced by the error, and the instruction "caused a miscarriage of justice when viewed as a whole and in the context of the entire trial." United States v. Vebeliunas, 76 F.3d 1283, 1291 (2d Cir. 1996) (plain error must "`have affected the outcome of the District Court proceedings'") (quoting Olano, 507 U.S. at 734).

  Here, the Court's instruction was not error, and even if it were, it would not have changed the outcome. Under United States v. Stavroulakis, 952 F.2d 686, 694 (2d Cir. 1992), "a conviction under the `scheme to defraud' clause of the bank fraud statute requires that the defendant engage in or attempt to engage in a pattern or course of conduct designed to deceive a federally chartered or insured financial institution into releasing property, with the intent to victimize the institution by exposing it to actual or potential loss." Dayan objects to the portion of the instruction that stated, "here, to obtain money or property from a bank without the company's informed consent" but Dayan could have been found to have acted with intent to defraud in obtaining money from his banks simply on his representation that the checks were good, the bank paid checks on uncollected funds. In other words, he tricked the banks into believing that the checks he was depositing represented legitimate diamond sales rather than mere money transfers. Even if the instruction were an incorrect statement of the law, it did not affect Dayan's substantial rights.

  ii. The Court's Response to the Jury's Question Regarding Count IV

  During deliberations, the jury submitted a question as to whether the definition of "attempt to defraud" could include other information on the loan applications besides the sales figures. After some discussion with counsel and accord by the parties, the Court submitted the text of pertinent portions of the charge. The Court also advised the parties that it would consider the issue further. Before any further discussions could take place, the jury came in with its verdict. Dayan now argues that the instruction given constitutes reversible error. Trial courts have discretion to determine what language to use in instructing the jury as long as they adequately state the law. United States v. Civelli, 883 F.2d 191, 195 (2d Cir. 1991) (if a supplemental charge is warranted, "the district court enjoys broad discretion in determining how, and under what circumstances, that charge will be given") (citations omitted). Here, the Court's supplemental instructions to the jury restating the applicable law were perfectly reasonable and done with the consent of the defense. By the time an objection was lodged about what more should be said to the jury and before the Court decided whether to provide a further instruction (it was at least 4:30 p.m. and one juror, as I recall, had to leave to teach a course at 5:00 p.m.) the jury came in with a verdict.


  For the reasons stated in this Opinion, the motions by Defendant for judgment of acquittal or, in the alternative, a new trial are hereby DENIED.



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