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United States v. Cook

United States District Court, D. Delaware

January 11, 2017

WILLIAM COOK, Defendant.


         At Wilmington this 11th day of January 2017, having considered defendant's motions to dismiss the indictment and for a bill of particulars, and the papers submitted in connection therewith;

         IT IS ORDERED that said motions (D.I. 14, 15) are denied, for the reasons that follow:

         1. Background. On June 7, 2016, a federal grand jury returned an indictment with notice of forfeiture charging defendant William Cook with one count of bank fraud, in violation of 18 U.S.C. § 1344, and one count of money laundering, in violation of 18 U.S.C. § 1957. (D.I. 2) Defendant entered a plea of not guilty to each count of the indictment. (D.I. 6) On October 17, 2016, defendant filed four pretrial motions. (D.I. 14, 15, 16, 17) A telephone conference was held on November 2, 2016. (D.I. 18) An order entered on November 29, 2016, granting the parties' joint motion for a briefing schedule for the motions to dismiss and for a bill of particulars.[1] (D.I. 21) The matter is fully briefed and ripe for review. (D.I. 22, 24)

         2. Motion to dismiss. Federal Rule of Criminal Procedure 12(b) permits a defendant to move to dismiss an indictment prior to trial based on a defect in the indictment, including lack of specificity and failure to state an offense. Fed. R. Crim. P. 12(b)(3). United States v. Bergrin, 650 F.3d 257, 268 (3d Cir. 2011). Federal Rule of Criminal Procedure 7(c) requires an indictment to "be a plain, concise, and definite written statement of the essential facts charged." United States v. Willis, __F.3d __, 2016 WL 7210094, at *4 (3d Cir. Dec. 13, 2016). "[T]he Federal Rules were designed to eliminate technicalities in criminal pleadings and are to be construed to secure simplicity in procedure." United States v. Huet, 665 F.3d 588, 594 (3d Cir. 2012). According to the Third Circuit, an indictment is facially sufficient if it "(1) contains the elements of the offense intended to be charged, (2) sufficiently apprises the defendant of what he must be prepared to meet, and (3) allows the defendant to show with accuracy to what extent he may plead a former acquittal or conviction in the event of a subsequent prosecution." Id. at 595 (quoting United States v. Vitillo, 490 F.3d 314, 321 (3d Cir. 2007)). "[N]o greater specificity than the statutory language is required so long as there is sufficient factual orientation to permit the defendant to prepare his defense." Willis, 2016 WL 7210094, at *4 (citations omitted). A court should uphold the indictment "unless it is so defective that it does not, by any reasonable construction, charge an offense." Id.

         3. When reviewing a motion to dismiss, a court may only consider the allegations contained in the charging document, because "the indictment must be tested by its sufficiency to charge an offense, " not by whether the "charges have been established by the evidence." United States v. Sampson, 371 U.S. 75, 78-79 (1962). In so doing, a court must accept as true the allegations set forth in the indictment. United States v. Besmajian, 910 F.2d 1153, 1154 (3d Cir. 1990). A pretrial motion to dismiss an indictment is not a vehicle for addressing the sufficiency of the government's evidence. Huet, 665 F.3d 588, 595.

         4. The charges.[2] The indictment alleges that, in March 2008, "A.B." ("the "Bank") approved a revolving line of credit to AJJ Distributing LLC ("AJJ").[3] (D.I. 2 at¶ 3) Defendant was the sole owner of AJJ, a Delaware limited liability company with its principal place of business in Sussex County, Delaware. (Id. at ¶ 2) The line of credit was secured through AJJ's accounts receivable due from its customers, and defendant signed and submitted borrowing base certificates ("BBCs") that verified the value of those accounts receivable. (Id. at ¶ 3) The Bank allowed defendant to withdraw funds pursuant to an agreement that the line of credit balance would not exceed 75% of the value of AJJ's accounts receivable, as determined by that week's BBC. (Id.)

         5. From on or around January 16, 2009 through and including April 16, 2010, defendant repeatedly submitted BBCs containing false accounts receivable to the Bank and contemporaneously requested loan disbursements in excess of the loan's actual value, resulting in unjustified total disbursements of $2.2 million. (Id. at ¶¶ 4-7) Subsequently, defendant misappropriated proceeds of the loan disbursements and caused AJJ to default under the loan, resulting in financial harm to the Bank. (Id. at ¶ 8)

         6. Paragraph 10 of the indictment details one execution of the purported scheme occurring on April 16, 2010. (D.I. 2 at ¶ 10) The indictment charges that defendant,

having knowingly devised and intending to devise the scheme and artifice to defraud, described in paragraphs 4 though 8 above, and for the purpose of knowingly executing and attempting to execute the aforementioned scheme to defraud the Bank, did transmit and caused to be transmitted, by facsimile, a request for disbursement under the loan, along with a BBC that included materially false and fraudulent representations regarding AJJ's accounts receivable, to wit, the BBC represented that AJJ's total outstanding accounts receivable for that reporting period were $6, 665, 887.73; whereas, in truth and in fact, as the defendant then and there well knew, AJJ's total accounts receivable were substantially less than represented, in that they were less than $3, 600, 000 in violation of Title 18, United States Code, Section 1344(1) & 2.

(D.I. 2 at ¶ 10)

         7. Count II incorporates by reference the previous paragraphs of the indictment, and charges that on or about April 16, 2010, defendant transferred $14, 700 by check from the Bank in Delaware to another business account at Bank of America in Baltimore, Maryland for the benefit of another business entity[4] that defendant personally controlled, which funds were derived from a specified unlawful activity, to wit, bank fraud. (Id. at ¶¶ 11-12)

         8. Discussion. Defendant moves to dismiss the indictment pursuant to Fed. R. Crim. P. 12(b), arguing that the facts alleged fail to establish that the financial transactions in question constitute bank fraud, and fail to establish that defendant intended and had awareness of wrongdoing in his financial transactions with the Bank to constitute bank fraud. (D.I. 14, 24) Defendant asserts that cursory and form language is used to describe the offense conduct and that the indictment fails to specify any exact dates, entries, methods, documents, or accounts and evidentiary support to show defendant's intent or knowledge. (D.I. 24)

         9. Plaintiff disputes the alleged flaws, arguing that the indictment states the essential elements of the charged offenses and satisfies the liberal notice pleading requirements of Fed. R. Crim. P. 7(c). (D.I. 22) Plaintiff submits that the indictment provides background on defendant's relationships with the Bank, whereby defendant had a business line of credit with the Bank that was secured through non-aged business accounts receivable. (D.I. 22 at 5) The indictment further explains defendant's scheme to defraud the Bank or scheme to obtain Bank monies through loan disbursements premised on BBC statements, which contained false accounts receivable. With respect to defendant's intent, plaintiff maintains that at this stage in the proceedings, it is required only to allege (not establish) intent.

         10. In light of the aforementioned authority, the court finds that the indictment sets forth the essential elements of bank fraud and money laundering, allows defendant to prepare for trial, and permits him to raise double jeopardy defenses in future prosecutions. Huet, 665 F.3f at 595; United States v. Schwartz,899 F.2d 243, 247 (3d Cir. 1990). Significantly, the indictment names the charged offenses, tracks the language of 18 U.S.C. ยง 1344, and sets the time frame for the scheme. The factual recitations sufficiently detail how loan disbursements were made based on the falsified BBCs submitted by defendant. While defendant argues that the indictment fails to specifically allege his intent to commit the offense, the court finds the allegations sufficient at this stage in the proceedings, when the government is required to ...

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