United States District Court, N.D. Illinois, Eastern Division
August 31, 2005.
UNITED STATES OF AMERICA, Plaintiff,
ROGER WOLF Defendant.
The opinion of the court was delivered by: DAVID COAR, District Judge
MEMORANDUM OPINION AND ORDER
On August 10, 2004, a Second Superceding Indictment charged
Defendant Roger Wolf ("Wolf" or "Defendant") with eight counts of
wire fraud, in violation of 18 U.S.C. § 1343 and 2. On April 15,
2005, after a jury trial, Wolf was found guilty as charged in the
Second Superceding Indictment. Presently before this Court is
Wolf's motion for judgment of acquittal, pursuant to
Fed.R.Crim.P. 29 ("Rule 29"). For the reasons set forth below, Wolf's
motion is DENIED.
I. Factual and Procedural Background
Illinois Vehicle Premium Finance Company ("IVPF") and Illinois
Vehicle Insurance Agency ("IVIA") were companies formed by Wolf,
that worked, in tandem, to sell automobile insurance policies to
high risk drivers who could not obtain insurance from "standard"
insurers (i.e., Allstate and State Farm). See Mot. for
Acquittal, p. 2.*fn1 Wolf was president of IVPF. Id. In 1988, Wolf hired Jerome Januszewski ("Januszewski") to serve as
IVPF's and IVIA's Chief Financial Officer. Id. Wolf owned
similar operations in Texas and Florida. Id.
In a typical IVPF sale, a new customer purchased a six or
twelve month insurance policy, but did not have to pay the entire
policy premium cost upon purchase. See Mot. for Acquittal, p.
2. Rather, IVPF would collect a down payment from the new
customer with his or her application, and allow the customer to
finance the remaining premium in monthly installments over the
term of the policy. Id. IVPF would purchase the policy from an
insurance carrier, and then collect the monthly installment
payments from the customer. Id. These monthly installment
payments included interest and other fees due IVPF in exchange
for financing the premium cost. Id.
In 1995, IVPF entered into a Collateralization Agreement with
Texas Commerce Bank National Association, currently known as JP
Morgan Chase Bank (hereinafter referred to as "Chase"). Mot. for
Acquittal, p. 2. Pursuant to the Collateralization Agreement,
Chase made $32.5 million in funding available to IVPF. Id. at
pp. 2-3 Each month, Chase would buy premium finance contracts
from IVPF, and forward IVPF the funds it needed to complete the
purchases relating to those new customers. Id. at p. 3 In
return, IVPF assigned the future payments it was due on these
financed policies (the "receivables") to Chase. Chase and IVPF
renewed and reissued their agreements in 1997, until IVPF had
over $55 million available from Chase to finance new policies.
The new policies and receivables that were assigned to Chase
were listed on a funding report that IVPF sent to Chase
approximately once a month. Mot. for Acquittal, p. 3. As noted by
several witnesses at trial, including Richard Melton ("Melton"),
a consultant for Chase, and Januszewski, Chase did not purchase all of the policies that IVPF
issued. Id. Chase only purchased those policies that were
defined in the Agreements as "eligible", and only those that were
included in the Funding Reports that IVPF sent Chase. Id.
The Collateralization Agreement also required IVPF to set up a
"Deposit Account" in which it would deposit monthly payments
received from customers whose policies were bought by Chase. Mot.
for Acquittal, p. 3. In addition, pursuant to the
Collateralization Agreement, the only payments that were to be
deposited into this Deposit Account were the monthly payments or
receivables owned by Chase; commingling was prohibited. Id.
Further, IVPF was required to submit to Chase daily reports of
monies deposited into the Deposit Account, to insure that all of
the funds in the Deposit Account were being wired to Chase in
accordance with the parties' agreement. Id. at pp. 3-4.
Additionally, IVPF was required to submit a monthly servicer's
report to Chase that included all of IVPF's new loan sales for
the month and tracked the total receivables that Chase owned.
Id. at p. 4.
In late 1999, Chase noticed a discrepancy between the amount of
receivables IVPF reported in its October 1999 Servicer's Report
and the amount of receivables reported in IVPF's most recent
financial statements. Mot. for Acquittal, p. 5. On November 2,
1999, Chase sent a letter to IVPF noting that it had discovered a
$9 million shortfall in the Collateral Pool Balance. Id. Until
this shortfall was reconciled, Chase ceased funding any new
policies to IVPF. Id. According to Chase's investment advisors,
Kris Harihara and Joseph Lorusso of Structured Finance
Associates, they were unable to conduct an audit or review of
IVPF's records until October 2000. According to the evidence presented by the Government, after
Chase ceased funding, Januszewski wire transferred $300,000 out
of the Deposit Account to IVPF's main operating account. Mot. for
Acquittal, p. 5. Melton testified that such a transfer was
prohibited by the Agreements, as were all other transfers that
occurred from December 1999 through September 2000. In total,
Januszewski made over 50 similar wire transfers out of the
Deposit Account totaling $6,255,000.000 Id. at p. 6. During
Wolf's trial, Januszewski claimed he instituted these wire
transfers after discussing IVPF's need for additional funds with
Wolf, and it was under Wolf's direction that Januszewski made
these wire transfers. Id. Januszewski testified that he
concealed these transfers, per Wolf's instructions, by
underreporting IVPF's policy sales on the monthly Servicer's
Reports sent to Chase during the Indictment Period. Id.
In October 2002, Melton and Harihara visited IVPF's offices and
compared IVPF's bank records to the deposits IVPF reported in its
September 2000 Servicer's Report. Mot. for Acquittal, p. 6.
According to Melton, he immediately discovered the wire transfers
out of the Deposit Account to IVPF's other operating accounts.
In May 2003, Januszewski was indicted on eight counts of wire
fraud, pursuant to 18 U.S.C. § 1343. In August 2003, Januszewski
entered a plea of guilty. On August 21, 2003, a superceding
indictment, that named both Januszewski and Wolf as defendants,
was returned. According to the Indictment, Wolf concealed the
diversion of funds by directing Januszewski to fax inaccurate
monthly Servicer's Reports to Chase during the indictment period.
As noted above, on April 15, 2005, after a jury trial, Wolf was
found guilty as charged in the August 10, 2004 Second Superceding
Indictment. II. Legal Standard for Rule 29 Motion
Wolf moves for judgment of acquittal pursuant to Rule 29. "A
motion for judgment of acquittal should only be granted if there
is insufficient evidence to sustain the conviction." United
States v. O'Hara, 301 F.3d 563, 569 (7th Cir. 2002) (citing
United States v. Jones, 222 F.3d 349, 351-52 (7th Cir. 2000);
Fed.R.Crim.P. 29(a)). When evaluating a motion for judgment of
acquittal pursuant to Rule 29, the court must view the evidence,
"in the light most favorable to the government," and determine
whether that evidence "could support any rational trier of fact's
finding of all the essential elements of the crime beyond a
reasonable doubt." United States v. Brown, 328 F.3d 352, 355
(7th Cir. 2003) (citing United States v. Williams,
298 F.3d 688, 691-92 (7th Cir. 2002)).
The Defendant argues that judgment of acquittal pursuant to
Rule 29 is warranted for two reasons. First, Wolf argues that
there was no evidence at trial that the funds diverted from the
Deposit Account actually belonged to Chase, and without such a
diversion, there is no evidence of a "scheme to defraud." Second,
Wolf contends that the Government claimed that it did not have to
prove any actual diversion, as long as there was evidence of
Wolf's attempt to divert funds that he thought belonged to Chase.
Wolf asserts that because "attempt to commit fraud" is not the
crime for which he was indicted, there is a material variance
between the Government's indictment and its proof, which demands
a judgment of acquittal. Each argument will be addressed in turn. A. Was There Insufficient Evidence Of A Scheme to Defraud?
Defendant argues that at trial, there was no evidence that the
funds IVPF transferred out of the Deposit Account actually
belonged to Chase, and therefore, no evidence that monies were
diverted or converted by Wolf. Defendant contends that virtually
all of the Government's witnesses testified that they did not
know how much of the money in the Deposit Account belonged to
Chase at any given time during the Indictment period, and that
they could not trace any of the wire transfers to Chase-owned
funds. Wolf maintains that the absence of any transfer of money
or property from Chase renders the Government's case fatally
insufficient, and directs this Court to acquit Wolf.
Wolf attacks the sufficiency of the evidence, and as this Court
previously noted, it must evaluate "the sufficiency of the
evidence in the light most favorable to the government, and
[will] grant [Defendant's] motion only where no rational jury
could have returned a guilty verdict." United States v.
Jenkins, 218 F.R.D. 611, 613 (N.D. Ill. 2003) (citing United
States v. Hausmann, 345 F.3d 952, 955 (7th Cir. 2003)). Wolf
argues in his Rule 29 motion that there was no evidence that the
funds in the Deposit Account belonged to Chase. However, viewing
all evidence in the light most favorable to the Government,
approximately $6,000,000 of those funds did belong to Chase. The
most significant evidence regarding these funds was provided by
Januszewski, IVPF's controller. Again, viewing the evidence in
the light most favorable to the Government, Januszewski's
testimony revealed that IVPF had significant financial problems
during the Indictment period, and would not be able to stay in
operation without additional funds. The testimony revealed that
per Wolf's direction, Januszewski diverted Chase funds from the
deposit account. In his memorandum in support of his Rule 29 Motion, Defendant
argues that at most, the Government proved a scheme that breached
the technical provisions of a contract. Further, Defendant
maintains that there was no evidence that Chase had any right to
or was otherwise entitled to funds belonging to IVPF, merely
because those funds were temporarily deposited into the Deposit
Account. At the close of evidence in Wolf's trial, the jury
received the following instruction:
Neither negligence nor a breach of contract standing
alone can form the basis of a scheme to defraud for
purposes of the wire fraud charged in counts one
Consequently, the jury was instructed that a mere breach of the
technical provisions of the Parties' contract could not form the
basis of the scheme to defraud. Therefore, viewing the evidence
in the light most favorable to the Government, Wolf and
Januszewski did more than merely co-mingle funds that rightfully
belonged to IVPF in the Deposit Account set aside for Chase
funds. Wolf and Januszewski knowingly diverted funds that
belonged to Chase to IVPF, in violation of the wire fraud
statutes. Accordingly, there was sufficient evidence presented by
the Government upon which the jury could convict Wolf.
In addition, Wolf notes that the Government asserted that it
need not prove that Chase actually lost money in order to prove
the requisite scheme. At the close of evidence, the jury received
the following instruction:
The wire fraud statute can be violated whether or not
there is any loss or damage to the victim of the
crime or gain to the defendant.
Defendant argues that the Seventh Circuit's decisions in United
States v. Walters, 997 F.2d 1219
(7th Cir. 1993) and United
States v. Davuluri, 239 F.3d 902
, 906 (7th Cir. 2001) stand for
the proposition that the government must prove that money or
property was transferred from the victim to the defendant as part of a fraudulent scheme in order
to convict under the mail or wire fraud statutes. In Walters,
Norby Walters, a sports agent, was charged with conspiracy, RICO
violations, and mail fraud. Walters, 997 F.2d at 1221. The mail
fraud charge arose from Walter's actions that caused
NCAA-eligible universities to pay scholarship funds to athletes
who had become ineligible to play because they signed
professional sports contracts with Walters. Id. The Government
argued that the mail fraud statutes were violated because each
university required its athletes to verify their eligibility to
play by mail sent to the appropriate conference (i.e., the Big
Ten). Id. Walters was convicted by a jury, but that conviction
was reversed because of certain procedural matters. Id.
Subsequently, Walters entered a conditional Alford plea to the
mail fraud charge, and the conspiracy and RICO charges were
dismissed. Id. at 12212-2. In their decision, the Seventh
Circuit noted that Walters "did not mail anything or cause anyone
to else to do so (the universities were going to collect and mail
the forms no matter what Walter did)." Id. at 1222. The
relevant question for the Seventh Circuit in reviewing Walters'
Alford plea was whether the scheme, as conceived by Walters,
"caused the universities to use the mails." Id. at 1222-23. The
Seventh Circuit found that there was no evidence that Walters
actually knew that the colleges would mail the athletes' forms.
Id. at 1223. Further, the Seventh Circuit found that Walters
did not actually take the universities' scholarship benefits in
order to profit from the deceit; rather, Walters took a portion
of the players' professional incomes. Id. at 1224. Finding the
Walters' mail fraud conviction must be reversed, the Seventh
[O]nly a scheme to obtain money or other property
from the victim by fraud violates § 1341. A
deprivation is a necessary but not sufficient
condition of mail fraud. Losses that occur as
byproducts of a deceitful scheme do not satisfy the
statutory requirement. Walters, 997 F.2d at 1227. Thus, the Seventh Circuit's holding
focused upon Walters' intent. The Seventh Circuit held that
there could not be any mail fraud, via the university forms,
because Walters' scheme never involved defrauding the
Additionally, Wolf directs the court, to Davuluri's
affirmation of the holding in Walters ("The section of
Walters on which Davuluri relies stands for the proposition
that the government must prove that money or property was
transferred from the victim to the defendant as part of a
fraudulent scheme in order to convict under the mail or wire
fraud statutes." Davuluri, 239 F.3d at 906 (citing Walters,
997 F.2d at 1227)). Again, however, Wolf erroneously places his
focus upon whether funds were transferred, when Davuluri's
holding is focused upon the Defendant's intent to defraud the
victim that is the subject of the indictment. From the evidence
presented by the Government, it is clear that Chase was the
intended victim of Wolf's fraudulent scheme.
Moreover, "[t]he wire fraud statute can be violated whether or
not there is any damage to the intended victim of the crime."
United States v. Sanders, 696 F.Supp. 327, 329 (N.D. Ill. 1988)
(citing United States v. Keane, 852 F.2d 199, 205 (7th Cir.
1988) ("the mail fraud statute proscribes fraudulent schemes; it
does not confine penalties to those who succeed in raking off
cash . . ."); see also United States v. Serpico,
320 F.3d 691, 694 (7th Cir. 2003). Consequently, it is well established in
the Seventh Circuit that the wire fraud statute can be violated
whether or not there is any loss or damage to the intended victim
of the crime or gain to the defendant. B. Was There A Material Variance Between The Indictment And
The Proof At Trial?
Defendant notes that the allegations of the Second Superceding
Indictment are that Wolf and Januszewski defrauded Chase out of
$6,000,000 of Chase's money, and concealed this fraud through the
Servicer's reports they faxed to Chase every month. Wolf argues
that there is a material variance between the offense charged
against Wolff a scheme to defraud by diverting Chase funds
and the offense proven a breach of the Servicing Agreement and
IVPF's duties under the Agreement. Wolf maintains that the facts
proven at trial are materially different from those alleged
Second Superceding Indictment. Wolf contends that this material
variance prejudiced Wolf's ability to defend against the charges,
and thus, this variance warrants a judgment of acquittal.
"Convictions generally have been sustained as long as the proof
upon which they are based corresponds to an offense that was
clearly set out in the indictment." United States v. Lovett,
811 F.2d 979, 986 (7th Cir. 1987) (internal citations omitted);
see also, United States v. Magana, 118 F.3d 1173, 1188 (7th
Cir. 1997). Further, the Supreme Court has stated:
The true inquiry, therefore, is not whether there has
been a variance in proof, but whether there has been
such a variance as to "affect the substantial rights"
of the accused. The general rule that allegations and
proof must correspond is based upon the obvious
requirements (1) that the accused shall be definitely
informed as to the charges against him, so that he
many be enabled to present his defense and not be
taken by surprise by the evidence offered by the
trial; and (2) that he may be protected against
another prosecution of the same offense.
Lovett, 811 F.2d a 986 (quoting Berger v. United States,
295 U.S. 78
, 82 (1935)).
As an initial matter, as this Court noted above, viewing all
evidence in the light most favorable to the Government, there was
no material variance between the indictment and the evidence presented at trial. Viewing all evidence in the light
most favorable to the Government, Januszewski and Wolf converted
at least $6,000,000 in funds which should have been remitted to
Chase. Consequently, Wolf's attempt to argue that at most, the
Government may have proven that Wolf and IVPF breached several
provisions of the Servicing Agreement and improperly commingled
Chase funds with IVPF funds is unavailing. As previously noted by
this Court, the jury was instructed, "Neither negligence nor a
breach of contract standing alone can form the basis of a scheme
to defraud for purpose of the wire fraud charged in counts one
through eight." The evidence showed that Wolf, along with
co-Defendant Januszewski, knowingly and intentionally diverted
funds that they knew belonged to Chase, for their own use. Thus,
viewing the evidence in the light most favorable to the
Government, the proof upon which Wolf's conviction was based
corresponds to the offenses set forth in the indictment. Further,
Wolf was fully apprised and informed of the charges against him,
and there is no risk of double jeopardy in this case.
Consequently, there was no material variance between the
indictment and the proof presented by the Government. IV. Conclusion
For the foregoing reasons, Wolf's motion for judgment of
acquittal pursuant to Fed.R.Crim.P. 29 is DENIED.
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