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UNITED STATES v. DORFMAN

December 9, 1981

UNITED STATES OF AMERICA
v.
ALLEN M. DORFMAN, ROY L. WILLIAMS, JOSEPH LOMBARDO, THOMAS F. O'MALLEY, AND ANDREW G. MASSA, ALSO KNOWN AS AMOS MASSA, DEFENDANTS.



The opinion of the court was delivered by: Marshall, District Judge.

      MEMORANDUM ORDER

Defendants in this case are charged in an eleven count indictment with conspiring to commit bribery, travel in interstate commerce with intent to commit bribery, and wire fraud. Count I charges the defendants with conspiring to bribe United States Senator Howard Cannon in order to obtain a favorable disposition on pending legislation involving deregulation of the trucking industry by securing for him the right to purchase certain property owned by the Central States, Southeast and Southwest Areas Pension Fund ("Fund") of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen, and Helpers of America. Count II charges the defendants with attempting to carry out that scheme. Counts III through XI charge defendants with nine separate wire fraud violations for attempting to defraud the Pension Fund of the loyal services of two of the defendants, and attempting to obtain money and property by false pretenses.

Defendants have filed numerous motions to dismiss all or part of the charges against them. They claim in various motions, apparently missing the irony of their position, that the indictment fails to state any claim against them; that it is too vague to permit them to understand the nature of the charges; that it states two claims in each of nine counts and is thereby "duplicitous"; and that it states the same claim in a number of different counts and is thereby "multiplicious". The government filed one consolidated response to these four motions. We treat each of them separately in this opinion.

I

Defendants claim that paragraph 2(a) of Counts III through XI of the indictment fails to state an offense under the wire fraud statute, 18 U.S.C. § 1343 (1976). The indictment charges that defendants engaged in a "scheme and artifice" designed to deny the Fund and its pensioners of their right to the conscientious, loyal and faithful services of defendants Thomas F. O'Malley ("O'Malley") and Amos Massa ("Massa"). Both parties agree, and the law is clear, that in order to state a wire fraud offense of this type the government must allege four elements: (1) the existence of a fiduciary duty; (2) a scheme or plan to breach that duty; (3) a specific intent to defraud the party to whom the duty is owed; and (4) use of the wires in furtherance of that scheme. Defendants' Joint Memorandum in Support at 3; Government's Consolidated Response at 11.

It is well settled, and defendants admit, that a scheme designed to cause the loss of intangible rights or benefits, including the loyal service of an employee, is actionable under the wire fraud statute. See United States v. Von Barta, 635 F.2d 999 (2d Cir. 1980); United States v. Bohonus, 628 F.2d 1167 (9th Cir.), cert. denied, 447 U.S. 928, 100 S.Ct. 3026, 65 L.Ed.2d 1122 (1980); United States v. Bush, 522 F.2d 641, 648 (7th Cir. 1975), cert. denied, 424 U.S. 977, 96 S.Ct. 1484, 47 L.Ed.2d 748 (1976); United States v. George, 477 F.2d 508, 510 (7th Cir.), cert. denied, 414 U.S. 827, 94 S.Ct. 49, 38 L.Ed.2d 61 (1973). Defendants contend, however, that there is no fiduciary duty owed by defendants O'Malley and Massa to the Fund and that, if there were, it was not breached nor was any fraud committed.

We are obliged, on these preliminary motions, to treat the allegations in the indictment as true and construe all the facts in the light most favorable to the government. Boyce Motor Lines, Inc. v. United States, 342 U.S. 337, 343 n. 16, 72 S.Ct. 329, 332 n. 16, 96 L.Ed. 367 (1953); Glasser v. United States, 315 U.S. 60, 62 S.Ct. 457, 86 L.Ed. 680 (1941); Von Barta, 635 F.2d at 1002. Given this posture, it is apparent that the defendants' motion is not well founded.

Defendant O'Malley is a Fund trustee and as such owes a fiduciary duty to the Fund under common law, the ERISA statute, 29 U.S.C. § 1102, 1103 (1976), and the separate agreement between the Fund and Victor Palmieri and Co. ("Palmieri"). See Defendants' Exhibit A. Defendants claim that the agreement with Palmieri relieved O'Malley and Massa of any duty they had with respect to the Fund's assets. We have examined the agreement and find that it in no way abrogates O'Malley's duty to act in the Fund's best interest. In fact, if the agreement has any effect, it appears to heighten the trustee's obligation not to interfere in the process of distribution of the Fund's assets. The trustees, under the agreement, maintain their responsibility for compliance with ERISA and monitoring the performance of the investment manager. Defendants' Exhibit A at 3. It is a fallacious argument for defendants to contend that because the Fund established an independent manager to distribute its real estate and other holdings, the Trustees were free to ignore their fiduciary duties to the Fund and interfere with that manager's best efforts to accomplish its function.

Defendant Massa is an employee of the Fund and a former trustee. The legal standard for determining his duty to the Fund depends on a variety of facts establishing the nature of his relationship with his employer. Von Barta, 635 F.2d at 1007; United States v. Brown, 540 F.2d 364, 375 (8th Cir. 1976); Bush, 522 F.2d at 652. This is a factual question requiring evidence at trial and not resolvable on a motion to dismiss the indictment.

The same is true of the defendants' argument that there was no breach of the fiduciary duty. Defendants are wrong in asserting that "absent some harm actually occurring to the beneficiary of a trust there is no breach of trust by the trustee" for purposes of the wire fraud statute. The alleged plan to deprive the Fund of faithful service — the scheme to defraud it of O'Malley's and Massa's loyalty — constitutes an offense under the wire fraud statute regardless of whether there was any eventual financial loss to the Fund. See United States v. Bronston, 658 F.2d 920, 927 (2d Cir. 1981); United States v. Keane, 522 F.2d 534, 546 (7th Cir. 1975), cert. denied, 424 U.S. 976,96 S.Ct. 1481, 47 L.Ed.2d 746 (1976); United States v. Bryza, 522 F.2d 414 at 422; George, 477 F.2d at 510.

Finally, defendants argue that a mere breach of fiduciary duty, without more, does not rise to the level of a criminal violation. See Bush, 522 F.2d at 648. The statement is true enough; however, here the government has alleged failure to disclose material information and affirmative conduct designed to deprive the Fund of relevant information which makes the breach a criminal act. See Bronston, 658 F.2d at 926; Von Barta, 635 F.2d at 1006; Bush, 522 F.2d at 649. Specifically, the indictment charges them with trying to purchase the property in question for Senator Howard Cannon, causing third parties to withdraw their bids on the property, failing to disclose the involvement of O'Malley and Massa in each of the above, and failure to disclose the involvement of defendant Allen Dorfman in the proposed purchase.

Defendants argue that there is no allegation that the information withheld was material, that Palmieri had a right to it, or that defendants did anything wrong in withholding it. Defendants' Memorandum in Support at 15. That interpretation is simply incorrect. The government has clearly alleged defendants' position giving rise to a fiduciary duty which was breached by the actions described above. What defendants are really asking is for this court to hold as a matter of law that none of this information was material to Palmieri's decision of how to dispose of the property. Again, this is a factual question not susceptible to resolution at this time. We leave to the government its opportunity to prove the breach of a legal duty and the materiality of information withheld. If the government fails to establish either the relationship it has alleged, the materiality of the information withheld, or defendants' actions in concealing that information, defendants can request a verdict at that time. At this stage it is clear that the indictment states an offense in paragraph 2(a) of Counts III through XI.

II

Defendants also attack Counts III through XI of the indictment on the ground of "vagueness". They submit that "after a thorough reading of the indictment" they are unable "to reasonably know or understand the precise nature and scope of the charges against them", thereby violating their fifth and sixth amendment rights. In addressing this argument, we treat separately paragraphs 2(a) and 2(b) of the counts in question.

The requirement that an indictment be reasonably specific stems from two constitutional guarantees: the fifth amendment right to indictment by grand jury and the sixth amendment requirement that defendants be informed of the charges against them. United States v. Hinkle, 637 F.2d 1154, 1157 (7th Cir. 1981). "The indictment must adequately apprise a defendant of the charges against him so that he can prepare a defense. Furthermore, it must establish a record that shows when a defense of double jeopardy may be available in the event future prosecutions are brought against him." Id. See Russell v. United States, 369 U.S. 749, 82 S.Ct. 1038, 8 L.Ed.2d 240 (1962); United States v. Cecil, 608 F.2d 1294 (9th Cir. 1979); United States v. Wabaunsee, 528 F.2d 1 (7th Cir. 1975). In general, an indictment is sufficient if it tracks the language of the statute which creates the offense, provided that the words of the statute set forth all of the elements necessary to constitute the crime. Hamling v. United States, 418 U.S. 87, 117, 94 S.Ct. 2887, 2907, 41 L.Ed.2d 590 (1974). See also United States v. Bailey, 444 U.S. 394, 100 S.Ct. 624, 636, 62 L.Ed.2d 575 (1980); United States v. Hinkle, supra; United States v. Minick, 636 F.2d 181, 184 (7th Cir. 1980).

Defendants are charged in Counts III through XI with violating the federal wire fraud statute, 18 U.S.C. § 1343 (1976), and each of the nine counts alleges a different specific wire transmission as a separate offense. But the telephone transmissions do not constitute an offense in and of themselves; the offense is dependent on the underlying fraudulent scheme which must also be alleged with sufficient particularity to inform defendants of the charge made against them. See United States v. Charnay, 537 F.2d 341, 352 (9th Cir.), cert. denied, 429 U.S. 1000, 97 S.Ct. 527, 50 L.Ed.2d 610 (1976); United States v. Curtis, 506 F.2d 985, 989-90 (10th Cir. 1974); United States v. Mandel, 415 F. Supp. 997, 1015-16 (D.Md. 1976), aff'd by an equally divided court, 602 F.2d 653 (4th Cir. 1979) (en banc) (per curiam), cert. denied 445 U.S. 961, 100 S.Ct. 1647, 64 L.Ed.2d 236 (1980); United States v. DeSapio, 299 F. Supp. 436, 445-46 (S.D.N.Y. 1969).*fn1

It should be apparent from what we have said in section I of this opinion, that paragraph 2(a), alleging a scheme to defraud the Fund of the loyal services of O'Malley and Massa, is not fatally vague. The indictment does far more than simply mirror the language of the wire fraud statute prohibiting interstate transmissions in furtherance of any "scheme or artifice to defraud", see 18 U.S.C. § 1343; it specifically refers to the victim of the fraud (the Fund), the nature of the scheme (to deprive the Fund of the loyal services of two named defendants), and the manner and means by which the fraud was to be carried out (specific conversations with the object of causing bids on Fund assets to be withdrawn and withholding material information from the Fund's managers). Thus, this part of the indictment is fundamentally different from those cases cited by the defendants in which indictments have been dismissed because, in merely reciting the language of the statute, they failed to allege an essential element of the crime, or failed to indicate the facts underlying the charge. See e.g., United States v. Cecil; United States v. Keith, 605 F.2d 462 (9th Cir. 1979); United States v. Curtis.

Paragraph 2(b), however, presents more serious problems. It states simply that defendants engaged in a "scheme or artifice * * * [t]o obtain money and property by means of fraudulent pretenses and representations." Indictment, Count III, ¶ 2. The final paragraph of each count includes a specific interstate wire transmission "for the purposes of executing" the scheme. Id. It does not allege any facts detailing who the victim of the alleged fraud was, what property is referred to, or how the property was to be obtained. Standing alone, the paragraph clearly would not meet the constitutional requirements of fair notice of the facts underlying the charge.*fn2 Russell v. United States, 369 U.S. at 765-66, 82 S.Ct. at 1047-48; see also Curtis; Mandel; DeSapio. But we do not judge the sufficiency of the indictment by the details of the charging paragraph alone; "in evaluating the sufficiency of an indictment, common sense and reason prevail over technicalities." United States v. Climatemp, Inc., 482 F. Supp. 376, 382 (N.D.Ill. 1979). The indictment must be viewed as a whole to determine if adequate notice of the fraudulent scheme is presented. See United States v. Strauss, 452 F.2d 375, 379 (7th Cir. 1971), cert. denied, 405 U.S. 989, 92 S.Ct. 1252, 31 L.Ed.2d 455 (1972); United States v. Climatemp, 482 F. Supp. at 382; United States v. Dorfman, 335 F. Supp. 675, 678 (S.D.N.Y. 1971).

In construing the indictment we are mindful of the fact that the government is not required to present a model indictment in every case, nor must it provide all the details of the offense in the charging papers. United States v. Conlon, 628 F.2d 150, 155-56 (D.C. Cir. 1980).

  The true test of the sufficiency of an indictment
  is not whether it could have been made more
  definite and certain, but whether it contains the
  elements of the offense intended to be charged,
  ["] and sufficiently apprises the defendant of
  what he must be prepared to meet, and, in case any
  other proceedings are taken against him for a
  similar offense, whether the record shows with
  accuracy to what extent he may plead a former
  acquittal or conviction.["] Cochran and Sayre v.
  United States, 157 U.S. 286, 290 [15 S.Ct. 628,
  630, 39 L.Ed. 704], . . .; Rosen v. United States,
  161 U.S. 29, 34 [16 S.Ct. 434, 435, 40 L.Ed. 606].
  United States ...

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