United States v. Jackson

          MEMORANDUM OPINION AND ORDER

          GINA M. GROH, CHIEF UNITED STATES DISTRICT JUDGE

         Currently before the Court is a Motion to Dismiss the Indictment pursuant to Federal Rule of Criminal Procedure 12(b)(3)(B)(v) filed by the Defendants on February 3, 2017. ECF No. 159. The Government filed a Response on February 9, 2017. ECF No. 161. On February 10, 2017, the Defendants filed an Amendment to their motion, to include copies of contracts between Kids Against Drugs (“KAD”) d/b/a Big Bucks Bingo of Berkeley County and two different charities. ECF No. 163. On February 15, 2017, the Defendants filed a motion for leave to file reply [ECF No. 164], which the Court granted on March 7, 2017. ECF No. 172.

         I. INTRODUCTION

         The Defendants were originally charged in a fifty-three-count indictment in which they are alleged to have committed mail fraud, conspired to launder money, aided and abetted money laundering, aided and abetted unlawful monetary transactions and operated an illegal gambling business. In a prior Order, the Court dismissed count fifty-three for lacking adequate specificity. See ECF No. 126. The Defendants' instant motion asks this Court to dismiss the indictment in its entirety because the alleged conduct charged in the indictment does not state a violation of the federal mail fraud statute. The Government argues that the requisite elements for charging the Defendants with mail fraud have been satisfied, and the indictment should not be dismissed.

         II. LEGAL STANDARDS

         An indictment “must be a plain, concise, and definite written statement of the essential facts constituting the offense charged.” Fed. R. Crim. P. 7(c)(1). “One of the principal purposes of an indictment is to apprise the accused of the charge or charges leveled against him so he can prepare his defense.” United States v. Fogel, 901 F.2d 23, 25 (4th Cir. 1990). The Fourth Circuit has upheld as sufficient indictments that did not allege specific acts in violation of cited statutes. See, e.g., United States v. Kelly, 462 F.2d 372, 374 (4th Cir. 1972) (finding that an “indictment, basically in the words of the statute, contained a sufficient statement of every essential element of the crime charged to enable defendants to present their defense”).

         To be found constitutional, “an indictment must (1) indicate the elements of the offense and fairly inform the defendant of the exact charges and (2) enable the defendant to plead double jeopardy in subsequent prosecutions for the same offense.” United States v. Williams, 152 F.3d 294, 299 (4th Cir. 1998); see also Hamling v. United States, 418 U.S. 87, 117 (1974) (finding that “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” (internal citations omitted)). These criteria make certain that a defendant enjoys his or her constitutionally guaranteed rights “under the Fifth Amendment, which provides that a defendant cannot be prosecuted for a capital or infamous crime except on presentment or indictment of a grand jury, and under the Sixth Amendment, which provides ‘that a defendant must be informed of the nature and cause of the accusation against him.'” United States v. Darby, 37 F.3d 1059, 1063 (4th Cir. 1994) (quoting United States v. Daniels, 973 F.2d 272 (4th Cir. 1992) (internal quotations omitted)). If an indictment is missing any essential element of the offense, it is invalid, and a bill of particulars cannot cure the defect. United States v. Loayza, 107 F.3d 257, 260 (4th Cir. 1997).

         Under Rule 12(b)(3)(B)(v), a defendant may move to dismiss an indictment on the ground that the indictment fails to state an offense. “In ruling on a pre-trial motion to dismiss an indictment for failure to state an offense, the district court is bound by the four corners of the indictment.” United States v. Boren, 278 F.3d 911, 914 (9th Cir. 2002). “A motion to dismiss an indictment can be determined before trial ‘if it involves questions of law rather than fact.'” United States v. Cortez-Ruiz, No. 15-CR-00114-LHK, 2016 WL 7034057, at *2 (N.D. Cal. Dec. 2, 2016) (quoting United States v. Shortt Accountancy Corp., 785 F.2d 1448, 1452 (9th Cir. 1986), cert. denied, 478 U.S. 1007, (1986)).

         “An indictment is sufficient if it . . . enables the Court to determine whether the facts alleged are sufficient in law to withstand a motion to dismiss or to support a conviction.” Winer, 323 F.Supp. at 605 (citing United States v. Fargas, 267 F.Supp. 452 (S.D.N.Y. 1967); United States v. Luros, 243 F.Supp. 160 (D. Iowa 1965); see also Rule 7(c) Fed. R. Crim. P.). The Supreme Court has long held that a bill of particulars cannot cause an indictment that is sufficient on its face to become fatally flawed. Dunlop v. United States, 165 U.S. 486, 491 (1897) (explaining that “[i]f the indictment be not demurrable upon its face, it would not become so by the addition of a bill of particulars”).

         The mail fraud statute was “enacted in 1872, as part of a recodification of the postal laws.” McNally v. United States, 483 U.S. 350, 356 (1987) (noting that “the original impetus behind the mail fraud statute was to protect the people from schemes to deprive them of their money or property”). The statute provides that

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or artifice or attempting so to do, places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or deposits or causes to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier, or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail or such carrier according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing, shall be fined under this title or imprisoned not more than 20 years, or both.

18 U.S.C. § 1341.

         The Fourth Circuit has explained Mail fraud is established when the Government proves “that the defendant (1) knowingly participated in a scheme to defraud and (2) mailed, or caused to be mailed anything ‘for the purpose of executing such scheme.'” United States v. Gillion, 704 F.3d 284, 294 (4th Cir. 2012) (quoting United States v. Pierce, 409 F.3d 228, 232 (4th Cir. 2005)); see also United States v. Murr, 681 F.2d 246, 248 (4th Cir. 1982); Pereira v. United States, 347 U.S. 1, 8 (1954). Courts have extensively considered the meaning and application of these two elements, and the words within each, over the past century. This Court examines each element in turn.

         The Supreme Court first construed the meaning of the phrase “any scheme or artifice to defraud” two decades after 18 U.S.C. § 1341 was enacted. See Durland v. United States, 161 U.S. 306 (1896). The court held that the phrase should be interpreted broadly in the context of property rights. Id. Responding to the court's decision, Congress “codified the holding of Durland in 1909, and in doing so gave further indication that the statute's purpose is protecting property rights.” McNally, 483 U.S. at 357.

         The Supreme Court has long held that “to defraud” refers to “wronging one in his property rights by dishonest methods or schemes, ” and generally signifies “the deprivation of something of value by trick, deceit, chicane or overreaching.” Hammerschmidt v. United States, 265 U.S. 182, 188 (1924). Congress's “codification of the holding in Durland in 1909 does not indicate that [it] was departing from this common understanding. . . . [T]he second phrase simply made it unmistakable that the statute reached false promises and misrepresentations as to the future as well as other frauds involving money or property.”^[1] McNally, 483 at 358-59.

         Defraud has been defined as causing “injury or loss to (a person or organization) by deceit.” Black's Law Dictionary 516 (10th ed. 2014). Webster's similarly defines it as “to take or withhold from (one) some possession, right, or interest by calculated misstatement or perversion of truth, trickery, or other deception.” Webster's Third New International Dictionary 593 (2002). Looking at the “common-law root of the federal fraud statutes, ” to be guilty of fraud, “an offender's purpose must be to injure.” United States v. Sadler, 750 F.3d 585, 590 (6th Cir. 2014) (internal quotations omitted). In 2016, the Eleventh Circuit consulted these definitions and explained the difference between deceiving and defrauding. See United States v. Takhalov, 827 F.3d 1307, 1310 (11th Cir. 2016).^[2] “[T]o defraud, one must intend to use deception to cause some injury; but one can deceive without intending to harm at all.” Id. at 1312. Accordingly, “a schemer who tricks someone to enter into a transaction has not ‘schemed to defraud' so long as he does not intend to harm the person he intends to trick.” Id. at 1313.

         The Second Circuit reached the same conclusion in United States v. Regent Office Supply Co. Under the Government's theory of the case, “fraud may exist in a commercial transaction even when the customer gets exactly what he expected and at the price he expected to pay.” 421 F.2d 1174, 1180 (2d Cir. 1970). The Regent court rejected the Government's theory. Explaining that the purpose of a scheme to defraud “must be to injure, ” the court found that there was no proof any customer had actually been defrauded. Id. at 1181. “As a result of the transactions of which the untrue statements were a part, money and property changed hands.” Id. “[F]alse representations were made, and . . . they were made by defendants' agents with knowledge of their falsehood.” Id. According to the Government, an inference should be made that the customers “were induced to part with their money because of the false representations, and that such calculated inducement amount[s] to fraud” under 18 U.S.C. § 1341. Id. Accordingly, the court found that although an intent to deceive and even to induce was likely shown, that alone is not enough to “constitute the ‘fraudulent intent' required by the statute.” Id. The mail fraud statute requires “evidence from which it may be ...