The opinion of the court was delivered by: JOHN GRADY, Senior District Judge
Before the court is defendant's motion to dismiss the indictment as
untimely. For the following reasons, the motion is denied.
On April 3, 2003, a nineteen-count indictment. was returned against
Brian McGowan charging him with investment adviser fraud and wire fraud.
The following facts, drawn from the indictment, are taken as true for
purposes of this motion. In 1997 and 1998, the years relevant to the
indictment, McGowan was an investment adviser. During those years,
McGowan devised a fraudulent, scheme, implemented through various
misrepresentations, to induce "Individual A" to invest with him.
individual A provided McGowan with over $260,000 to invest and manage on
her behalf. McGowan had misrepresented to Individual A that he was a
partner in a money management and consulting firm, and additionally, that
he managed financial and investment matters for certain well-known sports figures
and their families. Knowing that Individual A was partially disabled and
that the money she gave him to invest was substantially "all she had to
live on," McGowan falsely stated that he would place her money in "safe
and low risk investments" but. instead placed the funds in high-risk long
term investments that did not yield regular payments of income. McGowan
also falsely represented that if Individual A invested with him, he would
obtain health insurance for her.
Once in possession of Individual A's money, McGowan never provided her
with an accurate statement of her investments. Instead, he sent her
written materials which in some instances were confusing and without
usable information, and at other times, contained false information.
Further, "in order to lull Individual A into a false sense of security,
and to prevent her from requesting return of her funds or complaining to
law enforcement authorities," McGowan falsely represented the following:
(i) that the investments had been profitable and had generated high
returns; (ii) that, her money had been placed in certain investment
properties when, in fact, it had not; and (iii) that he was engaged in
ongoing business transactions with various high net-worth individuals,
including well-known professional athletes. McGowan also stalled
Individual A's request for the promised investment income, and later, her
request for return of the principal, by falsely stating: (i) that he had received
income payments but they were held up by banking practices; (11) that he
was "about to send the money"; (iii) that. he had obtained health
insurance for her; and (iv) that he had a plan for quick liquidation of
the investments through other-investors.
The indictment charges eighteen counts of wire fraud in violation of
18 U.S.C. § 1343, and one count of fraud by an investment adviser in
violation of 15 U.S.C. § 80b-6(2). The wire fraud counts, Counts One
through Eighteen, allege eighteen telephone calls between McGowan and
Individual A between April 13 and June 29, 1998, all in furtherance of
the scheme to defraud. The remaining count, Count Nineteen, alleges that
between approximately September 1997 and July 1998, McGowan, as an
investment adviser, willfully engaged in a practice and course of
business which operated as a fraud and deceit upon Individual A as
described in Count One of the indictment,
McGowan has filed a motion to dismiss the indictment.
The Federal Rules of Criminal Procedure permit a defendant to "raise by
pretrial motion any defense, objection, or request that the court can
determine without a trial of the general issue." FED. R. CRIM. P. 12(b)
(2). In considering a motion to dismiss an indictment, all. facts in the
indictment are taken as true and viewed "in the light most favorable to the government." United States v.
Yashar, 166 F.3d 873
, 880 (7th Cir. 1999). We may decide questions of law
raised in a motion to dismiss, but since the jury is the fact-finder, any
arguments which rely on disputed facts must be rejected. See United
States v. Shriver, 989 F.2d 898
, 906 (7th Cir. 1992).
McGowan argues that each of the nineteen counts of the indictment is
barred by the statute of limitations. We first take up his argument on
the wire fraud counts. There are two elements of the offense of wire
fraud under 18 U.S.C. § 1343: (i) a scheme to defraud, and (ii) the use
of a wire communication in furtherance of that scheme. See United States
v. Lindemann, 85 F.3d 1232, 1240 (7th Cir. 1996). The statute of
limitations for wire fraud is five years, United States v. Pearson,
340 F.3d 459, 464 (7th Cir. 2003), and the limitations period begins to
run from the date of the wire communication. See United States v.
Tadros, 310 F.3d 999, 1006 (7th Cir. 2002). Each use of the wires
here, each telephone call constitutes a separate offense. See id.
McGowan contends, and the government, does not dispute, that in March
1998, Individual A, having received neither her money nor her requested
documentation, brought her concerns to the FBI and began recording her
conversations with McGowan. This fact, according to McGowan, dooms the
wire fraud counts. McGowan reasons that since each of the charged calls
occurred after Individual A had approached the FBI (the first occurred on April 13, 1998), the
calls could not be "in furtherance" of the scheme because Individual A
could no longer be duped, or "lulled," by the representations made in the
McGowan argues that the scheme was completed when Individual A
approached the FBI in March 1998. It was then, he contends, that the
statute of limitations began to run, and the indictment, filed 5 years
and one month later, is time-barred.
It seems to us, however, that McGowan misunderstands the relationship
of limitations to the argument he is making. It is not the scheme that
starts the limitation period. It is the scheme plus a wire communication
in furtherance of the scheme. Only when the wire communication has
occurred has the crime of wire fraud been committed, triggering the
limitations period. All of the alleged telephone calls were made within
the five-year window prior to the filing of the indictment. It is true
that a substantial amount of the scheme activity is alleged to have
occurred more than five years before the return of the indictment. But
there are no charged wire communications going back that far. They are
all alleged to have occurred less than five years before the indictment.
See United States v. Howard, 350 F.3d 125, 127 (D.C. Cir. 2003) ("[T]he
use of the mails or wires within the period allowed the government to
reach the crime and yet rely on proof of scheme activity in an otherwise
time-barred period."). Putting aside the non-issue of limitations, McGowan's real argument is
simply that, as a matter of law, telephone calls cannot be deemed to be
"in furtherance" of a scheme where, as here, the scheme has been detected
before the calls are made. It is well-settled that mail, or wire
communications for the purpose of lulling a victim of a fraud into a
false sense of security, even after a defendant has obtained the money,
can be in furtherance of a scheme to defraud. See Schmuck v. United
States, 489 U.S. 705, 710-lb, 109 S.Ct. 1443, 103 L.Ed.2d 734 (1989);
United States v. Rumsavich, 313 F.3d 407, 413 n.2 (7th Cir. 2002).
McGowan does not contest this proposition. Instead, he seeks to add the
qualification that such "lulling" communications can be "in furtherance"
of a fraudulent scheme only if the victim is, in fact, misled by the
The Seventh Circuit has recently considered this question. In United
States v. Bach, 172 F.3d 520 (7th Cir. 1999), the defendant had lured
investors into his Ponzi scheme with promises of lucrative interests in
oil and gas leases. The defendant was convicted of two counts of mail
fraud. The first mailing was a check, purporting to represent profits
from one of the leases, which defendant sent to one of the victims. The
second was a report of income and expenses on another lease mailed to a
different victim who erroneously believed ho had an interest in the
lease. The report was accompanied by a letter advising the victim that because of the financial results shown in the report, the amount of
operating expenses deducted from his income had been increased.
On appeal, the defendant argued that neither mailing was in furtherance
of the scheme to defraud because "his victims were smelling a rat and
beginning to seek legal counsel," and "[w]ith the scheme unraveling . . .
the mailings could not have been in furtherance of it." Id. at 521. The
Seventh Circuit flatly rejected the argument, holding that "[i]t is
irrelevant that the mailings failed in their purpose; a scheme to defraud
need not. succeed to violate the mail fraud statute." Id. at 522.
What is material is not the effect of the communication, but rather
defendant's purpose in making the communication. On that score, the Bach
Court noted that "when asked at argument what the purpose of the mailings
could have been, if not to lull the recipients into thinking that maybe
they would get the ...