The opinion of the court was delivered by: Matsumoto, United States District Judge
Defendants Courtney Dupree ("Dupree"), Thomas Foley ("Foley") and Rodney Watts ("Watts") (together, "defendants") are charged together in three counts, Watts is charged in four counts, and Dupree is charged in all five counts of a five-count superseding indictment. (See ECF No. 155, Superseding Indictment ("Superseding Indictment").) Count One charges all defendants with Conspiracy to Commit Bank, Mail and Wire Fraud in violation of 18 U.S.C. §§ 1349, 3551 et seq. (Id. at ¶¶ 17-18.) Count Two charges all defendants with Bank Fraud in violation of 18 U.S.C. §§ 1344, 2, 3551 et seq. (Id. at ¶¶ 19-20.) Count Three charges defendants Dupree and Watts with making a False Statement in violation of 18 U.S.C. §§ 1014, 2, 3551 et seq. (Id. at ¶¶ 21-22.) Count Four charges all defendants with making a False Statement by "knowingly and intentionally [making] a false statement and report, and willfully overvalu[ing] property and security, for the purpose of influencing the action of Amalgamated Bank upon one or more loans. . ." in violation of 18 U.S.C. §§ 1014, 2, 3551 et seq. (Id. at ¶¶ 23-24.) Count Five charges only defendant Dupree with an additional count of Bank Fraud, in violation of 18 U.S.C. §§ 1344, 2, 3551 et seq. (Id. at ¶¶ 25-26.)
The first four counts of the Superseding Indictment arise out of an alleged scheme to defraud Amalgamated Bank ("Amalgamated"), a financial institution, the deposits of which were insured by the Federal Deposit Insurance Corporation, and C3 Capital, LLC, a private equity investment firm, by obtaining, and attempting to obtain, loans for GDC and its subsidiaries on the basis of false financial statements and other material misrepresentations between January 2007 and July 2010. (Id. at ¶¶ 5, 6, 8.)
Count Five was added in a Superseding Indictment filed on March 25, 2011, and charges only defendant Dupree with an additional count of bank fraud for "knowingly and intentionally execut[ing] and attempt[ing] to execute a scheme and artifice to defraud Amalgamated Bank, and to obtain moneys, funds, credits and other property owned by, and under the custody and control of, Amalgamated Bank by means of materially false and fraudulent pretenses, representations and promises" between August 4, 2010 and March 1, 2011. (Id. at ¶ 26.) Presently before the court is defendant Dupree's motion to dismiss Count Five of the Superseding Indictment. For the reasons set forth below, defendant Dupree's motion is granted and Count Five is dismissed without prejudice and with leave for the government to re-present the matter to the grand jury.
I.The Agreement and Subsequent Default
The following facts were submitted by defendant Dupree in support of his motion to dismiss Count Five of the Superseding Indictment, but are not alleged in Count Five. On August 29, 2008, JDC Lighting, LLC, Unalite Electric and Lighting, LLC, and Hudson Bay Environments Group, LLC (the "Subsidiaries") entered into a Revolving Credit and Term Loan Agreement with Amalgamated Bank (the "Agreement"). (See ECF No. 188, Ex. A, Agreement dated Aug. 29, 2008.) GDC guaranteed the loan. (See id. at ¶ 1.08.) Pursuant to paragraph 5.05 of the Agreement, each borrower agreed that "so long as [the] Agreement is in effect," the borrower would "(i) [m]aintain its operating accounts at the Bank, and (ii) deposit all of its revenue, upon receipt, into an operating account at the Bank." (See id. at ¶¶ 5, 5.05.)
On May 7, 2010, Amalgamated informed the Subsidiaries that "Events of Default have occurred," and reserved its rights to "charge interest on the outstanding principal amount of the Loan at the default rates . . . and the right to declare the Obligations under the Loan Documents . . . immediately due and payable." (ECF No. 188, Ex. D., Letter from Amalgamated dated May 7, 2010.)
On July 23, 2010, Amalgamated sent a further letter to the Subsidiaries informing them that "as a result of the existing Events of Default identified in the May 7, 2010 letter and additional Events of Default that have arisen, all availability under the Revolving Credit Facility has been frozen and the Bank is hereby exercising its right to accelerate the Loans and demand payment in full of all indebtedness owing under the Credit Agreement, the Notes and the other Loan Documents." (See ECF No. 188, Ex. E, Letter from Amalgamated dated July 23, 2010.)
In a state court proceeding initiated by Amalgamated by Order to Show Cause dated August 4, 2010, New York Supreme Court Justice Shirley Werner Kornreich granted Amalgamated's request, inter alia, for an order temporarily restraining defendants, GDC and its affiliates, from "moving, removing, transferring, encumbering . . . assets . . . and . . . books [and] records . . . other than in the ordinary course of business. . . ." (ECF No. 188, Ex. G, Order to Show Cause Appointing Temporary Receiver, dated Aug. 4, 2010, at ¶ 21 (the "August 4 Order").) Justice Kornreich also ordered that all funds in the Chase accounts be deposited into the Amalgamated Bank account. (Id. at ¶ 24.)
Presently before the court is defendant Dupree's motion to dismiss Count Five of the Superseding Indictment, which charges defendant Dupree with bank fraud pursuant to 18 U.S.C. §§ 1344, 2 and 3551 et seq. The court held oral argument on the motion on June 2, 2011. (See Transcript of Proceedings before the Honorable Kiyo A. Matsumoto on June 2, 2011 ("Tr.").) Defendant Dupree argues: (1) that the government cannot show that the funds Dupree transferred were in the property of or in the possession of another because Amalgamated Bank had not given written notice under New York law of its intent to claim the funds Dupree allegedly took (ECF No. 188-2, Memorandum in Support of Defendant [Dupree's] Motion for Dismissal of Count Five of the Indictment ("Dupree Count Five Mem.") at 6-10); and (2) that the ...