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U.S. v. VIERTEL

May 4, 2005.

UNITED STATES OF AMERICA,
v.
CHRISTIAN T. VIERTEL, Defendant.



The opinion of the court was delivered by: JOHN KOELTL, District Judge

OPINION AND ORDER

The defendant, Christian Viertel ("Viertel"), was found guilty by a jury on October 2, 2002 on each count of a three-count indictment charging conspiracy to commit mail and wire fraud, as well as substantive counts of mail fraud and wire fraud. The defendant now moves pursuant to Federal Rule of Criminal Procedure 33 for a new trial based on allegedly "newly discovered evidence," which, the defendant argues, establishes that his mail and wire fraud convictions were not supported by sufficient use of the mails and wires, respectively, and that no action in furtherance of the conspiracy occurred within the statute of limitations. The defendant has also filed a motion seeking the production of certain Grand Jury exhibits related to the allegedly "newly discovered evidence."

I.

  Familiarity with the facts and procedural history of the case are assumed and details are recounted to the extent necessary to decide the present motion. These facts are set forth in the Court's prior Opinion and Order dated February 19, 2003. See United States v. Viertel, No. S2 01 Cr. 571, 2003 WL 367867 (S.D.N.Y. Feb. 19, 2003). In that decision, the Court denied the defendant's previous motion pursuant to Federal Rule of Criminal Procedure 33 for a new trial based on the Government's alleged withholding of material exculpatory evidence in violation of its obligations under Brady v. Maryland, 373 U.S. 83 (1963).*fn1

  The original indictment in this case charged Christian Viertel, Fritz Blumenberg ("Blumenberg"), and John Lee ("Lee") with conspiring to commit mail and wire fraud in connection with the submission of false invoices to Burda Media, Inc. ("Burda"). Burda Media, the direct victim of the fraud, served as the New York press office for Burda Holding, a magazine and newspaper publisher in Germany. (Trial Transcript ("Tr.") 89-90.) The indictment also charged the three defendants with substantive counts of mail and wire fraud as part of the scheme. A superseding indictment filed February 14, 2002 added two counts of tax evasion against Blumenberg. Blumenberg, the President of Burda Media, maintained substantial control over the company's New York office, including its finances.

  Blumenberg pleaded guilty to the charges in Indictment S1 01 Cr. 571 on April 5, 2002 and later testified before the Grand Jury pursuant to a grant of immunity. Blumenberg's testimony included an admission that he owed roughly $67,000 to Christian Viertel on an outstanding loan. See Viertel, 2003 WL 367867, at *1 (citing Grand Jury Transcript dated June 6, 2002 at 2:05 p.m. at 43).

  The Grand Jury subsequently returned Indictment S2 01 Cr. 571 against Viertel and Lee on June 6, 2002.*fn2 The Indictment charged Viertel with conspiring with Blumenberg to commit mail and wire fraud by submitting false invoices to Burda from five companies owned by Viertel ("Viertel companies"). The Indictment also charged Viertel with substantive counts of mail and wire fraud in furtherance of the conspiracy.

  Viertel's trial began on September 12, 2002. There was substantial evidence at trial that false invoices were submitted to Burda from the Viertel companies — Transvideo, TV Broadcast Center, Inc., Eurocast Corp., Telcopa Ltd., and Agate Reality Corp. Burda employees testified that they had never heard of most of the companies, never saw work product from the companies to justify the invoices, and never saw invoices from some of the companies. (See, e.g., Tr. 762-66, 803, 842-48, 852-70, 883-903, 1061-1068, 1116-1128.) Moreover, the witnesses testified that the invoices described work that Burda never requested and had no reason to request. (See, e.g., Tr. 842-48, 852-70, 883-903, 1061-68, 1102-03, 1116-32.) Some of the invoices were paid by checks made out to "cash" or to the Viertel companies and that the checks payable to the companies were deposited into bank accounts controlled by Viertel. (See, e.g., Tr. 1374-1384, 1398-1427, 1433-1437.) Viertel, via his own accounts and those of the Viertel companies, made payments to Blumenberg, often by direct payment of Blumenberg's bills. (See, e.g., Tr. 1459-1520, 1525-1536.)

  Burda Holding funded Burda Media by wiring money from Germany to Burda Media's New York bank account whenever that account fell below a certain level. (Tr. 309-10, 319.) Burda Media sent paid invoices from New York to Germany by Apex air freight on a monthly basis in order to document its expenses. (Tr. 94-101, 205, 302-04.) Fraudulent invoices created for the Viertel companies were sent by interstate carrier from New York to Germany on a monthly basis, and regular interstate wires from Germany to New York funded the payments that Burda Media made to Viertel and Blumenberg. (Tr. 94-101, 302-19.) Blumenberg frequently directed Ellen Kiefer, treasurer at Burda Media, to cash checks in payment of invoices from the Viertel companies and to provide that cash to Blumenberg. Kiefer became suspicious, and in or about May 1996, advised Burda Holding's attorneys of her concerns. (Tr. at 386.) Kiefer was instructed by these attorneys to continue "business as usual" and not to "change anything while they were investigating." (Tr. at 387.)

  On June 18, 1996, in a handwritten note (Gov't Ex. 3, see also Tr. 285), Blumenberg instructed Kiefer to issue a check to Agate Reality Media Services for $8120.10 that Viertel would pick up later that day. (Gov't Ex. 501; see also Tr. 289-90.) Kiefer issued the check on June 18, 1996 (Gov't Ex. 767; see also Tr. 288-90), and it was deposited into a bank account controlled by Viertel the same day. (Gov't Ex. 767; see also Tr. 1436.) Viertel deposited this check into his bank account, which depleted Burda Media's bank account and led Burda Holding, on June 24, 1996, to wire $350,000 to Burda Media in order to replenish Burda Media's accounts. (Tr. 324-327.) On or about June 28, 1996, Kiefer mailed either a copy or the original Agate Reality invoice (Gov't Ex. 501, see also Tr. 630-31) from Burda Media in New York, to Burda Holding in Germany as part of the routine mailing of all invoices (Tr. 318-19.) The June 24, 1996 wire of cash from Germany to New York and the June 28, 1996 mailing of the Agate Reality invoice provided the jurisdictional predicates for the substantive wire and mail fraud counts against Viertel.*fn3

  Viertel's counsel advanced the theory at trial that Viertel was in fact a victim of Blumenberg. (Tr. 72-82.) The defendant argued that Blumenberg submitted false invoices to Burda from the Viertel companies and then pocketed the proceeds or deposited Burda's payment checks into the companies' accounts as loan repayments to Viertel — all without Viertel ever knowing that the funds were the product of the submission of fictitious invoices. (Tr. 75-80, 1919-1920.) The Government challenged the defendant's loan repayment theory and instead portrayed the payments as kickbacks. (Tr. 1941-1945.)

  At the conclusion of the Government's case, Viertel made a motion for dismissal of the charges and entry of a judgment of acquittal pursuant to Federal Rule of Criminal Procedure 29. With respect to the mail and wire fraud charges, Viertel argued that Burda Holding already knew of the fraud at the time of the June wiring and mailing, and that neither of these acts truly advanced the fraud. The defendant also argued that he had received payment for the Agate Reality invoice before the mailing occurred and that the evidence did not establish that the June 18, 1996 check to Agate Reality had triggered the subsequent June 24, 1996 wire. With respect to the conspiracy charge, the defendant argued that the evidence did not show that Viertel had seen the actual invoices or that Viertel knew that the checks deposited into his bank account were issued pursuant to fraudulent invoices.

  The Court denied the defendant's Rule 29 motion. The Court noted that the alleged mail and wire fraud scheme

 
was not simply fraud by which a payment was made but a scheme whereby the funds to obtain the money for the payment would be obtained from Burda in Germany such that, pursuant to the scheme, an invoice would be sent to Germany, where it would be kept, and that the funds of Burda in New York would be replenished by wires from Burda in Germany such that Burda in New York would have sufficient ongoing funds. (Tr. 1817-18.)
  The Court also noted that there was sufficient evidence from which the jury could find that there was an agreement between Viertel and Blumenberg to engage in a scheme to defraud and that the scheme to defraud had as its objects mail fraud and wire fraud. (Tr. 1818.) On October 2, 2002, the jury returned a verdict finding Viertel guilty on all three counts of the indictment.

  At sentencing on June 9, 2003 the Court rejected Viertel's argument that the checks issued by Burda Media and deposited into Viertel's bank accounts were actually repayments of personal debts that Blumenberg owed to Viertel. (See Tr. dated Jun. 9, 2003 at 13.) The Court noted that the Government had shown by more than a preponderance of the evidence, that Viertel participated with Blumenberg in the fraud, and that the bank accounts of Viertel and his wife, Laura Petrella, were used to siphon money from Burda. The frequency of the payments into these accounts, the odd amounts of the payments, and the fact that a number of the checks had been endorsed by Viertel and Petrella, indicated that the accounts were used to facilitate the fraud and that Viertel was in fact aware of the fraud. (Id. at 13-14.) Accordingly, the Court held Viertel responsible for the amount of $345,673.96, the total amount deposited into the various bank accounts controlled by Viertel. (Id. at 14.) The Court also rejected Viertel's request for a minor participant downward adjustment based on the long-standing and repeated nature of the ...


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