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United States v. Doyle

April 11, 2006

UNITED STATES OF AMERICA
v.
JOSEPH DOYLE, AND MARY CAVANAUGH



The opinion of the court was delivered by: Judge Rebecca R. Pallmeyer

MEMORANDUM OPINION AND ORDER

Defendant Mary Cavanaugh has been charged in a four-count indictment with mail fraud under the Hobbs Act, 18 U.S.C. §§ 1341 and 1342, in connection with Chicago Public Schools ("CPS") contracts awarded to her employer, Tru-Lite Window Company, Inc. ("Tru-Lite"). Cavanaugh has moved the court to dismiss all four indictment counts, arguing that the government's evidence is insufficient to demonstrate that she intended to defraud the Board of Education of Chicago (the "Board"). For the reasons discussed below, the court denies Cavanaugh's motion.

BACKGROUND

This case arises out of Cavanaugh's alleged participation in a scheme to circumvent contracting requirements established by the Board's Minority and Women Owned Business Enterprise ("MBE/WBE") Procurement Program (the "Program"). The Program established a goal of awarding not less than 26% of the total annual dollar value of competitively bid CPS contracts to minority-owned businesses.*fn1 Indictment ¶ 1(f). To meet that goal, the Board required that individual CPS contracts contain provisions requiring that at least 26% of the contract's dollar value be directed to minority-owned businesses. Id. at ¶1(j). Bidders demonstrated compliance with this requirement by completing forms that identified the subcontractors they intended to use to achieve Program goals and the percentage of the work each subcontractor would perform. Id. at ¶ 1(k).

These subcontractors, in turn, demonstrated minority-controlled status by submitting an MBE-certification application to the Office of Business Diversity showing that the applicant company satisfied certain ownership and control requirements. Id. at ¶ 1(I). Alternatively, contract bidders could obtain full or partial waivers of MBE participation after demonstrating a good faith attempt to comply with Program goals. Id.

At all times relevant to the Indictment, Cavanaugh worked as an accountant for Tru-Lite, an Illinois window-replacement business run by her co-defendant, Joseph Doyle. Id. at ¶ 1(a)--(b). On or about July 3, 1996, Tru-Lite bid for an $11 million CPS contract to install aluminum windows, asking CPS to waive Program requirements because Tru-Lite employees were "specially trained to perform this particular work." Id. at ¶ 4. The Board awarded the contract to Tru-Lite on or about July 24, 1996, but only partially waived Program requirements, permitting Tru-Lite to subcontract a smaller percentage of contract work than was contemplated by the Program.*fn2 Id. at ¶ 5--6. Then, in July 1998, Tru-Lite bid for and was awarded a $6 million extension of the prior CPS contract, and Tru-Lite was again required to submit forms demonstrating Program compliance. Id. at 7--8. For reasons not disclosed in the Indictment, Doyle was unable or unwilling to work with the minority-owned business that had performed work under the original contract, identified only as "Company A" in the Indictment. Instead, Tru-Lite represented in its bid materials that another minority-owned company, Quality Window Installation, Inc. ("Quality"), would perform the required percentage (6.4%) of the extension-contract work. Id. at ¶ 7.*fn3

Quality was ostensibly owned and operated by Andre G. Prophet, an African-American who was also at that time a Tru-Lite employee. Id. at ¶¶ 1(d), 9. The government alleges that Quality was, in fact, a sham corporation controlled by Defendant Doyle, whose own company (Tru-Lite) did not satisfy MBE requirements, and that Doyle and Cavanaugh misrepresented Quality's minority-owned status in order to obtain the $6 million contract extension. Id. at ¶ 11. In a February 1998 meeting, Doyle and Cavanaugh allegedly offered to help Prophet form his own company and promised that Tru-Lite would subcontract CPS work to the new business. Id. at ¶ 12. According to the Indictment, Doyle and Cavanaugh chose the name, "Quality Window," and made all of the decisions and performed most of the work associated with starting the new business. Id. at ¶ 13--22. Defendants directed Prophet to open a business checking account with a $100 Tru-Lite check. Id. at ¶ 16. They prepared and submitted paperwork incorporating and licensing Quality, and again paid the necessary fees with Tru-Lite checks. Id. at ¶ 17. They told Prophet to obtain insurance through Tru-Lite's insurance agent and directed the agent to send premium bills to Cavanaugh, who paid the premiums with Tru-Lite funds. Id. at ¶ 19.

Significantly, from the government's perspective, Cavanaugh also prepared Prophet's MBE paperwork, which stated that Prophet controlled Quality-"making financing decisions regarding check signing, the hiring and firing of management and non-management personnel, supervision of field production, and supervision of office personnel"-even though she allegedly knew that his actual participation in the company was negligible. Id. at ¶ 20. The government also cites MBE paperwork stating that Prophet contributed $500 from his personal savings account to purchase Quality shares, when in fact Tru-Lite was the source of those funds. Id. at ¶ 21. Based on these alleged misrepresentations, Quality received MBE certification and CPS awarded Tru-Lite the contract extension. Id. at ¶ 22--23.

After Quality began work on the CPS project using Tru-Lite employees, Prophet's role within the company remained limited, at best. Id. at ¶ 25. Contrary to statements in Quality's MBE application, personnel decisions were controlled by Doyle, not Prophet. Id. Without Prophet's authorization, Doyle and Cavanaugh distributed checks in Quality's name to Tru-Lite employees, some of whom did not work at the schools that were being billed for Quality's work. Id. at 25--26. Over time, Prophet grew increasingly frustrated with his limited role in what he believed to be his own company, and raised the issue with Doyle on several occasions. Id. at 29. Apparently in response to Prophet's complaints, Doyle fired Prophet from Tru-Lite and Quality in or about December 1998. Id. Nevertheless, the Indictment alleges that Doyle and Cavanaugh continued to act on Quality's behalf, apparently using Prophet's signature stamp to execute lien waivers which the Board required as a condition of final payment. Id. at ¶¶ 3, 30.

On August 2, 2005, Doyle pleaded guilty to Count I of the Indictment. This court has sentenced him to two years' probation and ordered restitution of $89,304.00 to the Board. Cavanaugh is scheduled to stand trial for her alleged participation in the scheme to defraud the Board on June 12, 2006.

DISCUSSION

Relying on evidence outside the four corners of the Indictment, Cavanaugh contends that no reasonable jury could find beyond a reasonable doubt that she intended to defraud the Board. Cavanaugh asserts that she participated in Quality's formation because her employer, Doyle, instructed her to do so, and that nothing about that routine process indicated to her that the company was a sham. See Motion of Mary Cavanaugh to Dismiss the Indictment (hereinafter, "Motion to Dismiss"), at 2--6. Cavanaugh also argues that the government was called upon to present evidence concerning her culpability at Doyle's sentencing hearing, but failed to do so. Id. at 11--14. In his sentencing memorandum, Doyle took the position that, under the Sentencing Guidelines, his offense level could be increased for supervising the alleged scheme only if Cavanaugh was herself "criminally responsible" for the offense. See Def. Joseph Doyle's Sentencing Mem., Ex. 13 to Motion to Dismiss, at 13--15. Based upon the government's decision not to address her culpability at the hearing, Cavanaugh infers that the government cannotmake out its case against her.*fn4 Motion to Dismiss at 12--14. Cavanaugh also points out that Doyle's attorney, acting on his client's behalf, stated in Doyle's sentencing memorandum that "he does not believe that Mary Cavanaugh committed any crime by any of the activities he concededly directed her to do." Id. at 10 n.8. For its part, the government declines to address the substance of its case, arguing instead that it is premature to address the sufficiency of the evidence before trial. Gov't's Response to Def. Mary Cavanaugh's Motion to Dismiss the Indictment, at 1--2.

A. Motion to Dismiss Standard

Cavanaugh has moved to dismiss the Indictment pursuant to FED. R. CRIM. P. 12. Ordinarily, an indictment is tested before trial "solely by its sufficiency to charge an offense, regardless of the strength or weakness of the government's case." United States v. Risk, 843 F.2d 1059, 1061 (7th Cir. 1988). An indictment is constitutionally sufficient if it: (1) states "each of the elements of the crime charged;" (2) provides "adequate notice of the nature of the charges so that the accused may prepare a defense;" and (3) "[allows] the defendant to raise the judgment as a bar to future prosecutions for the same offense." United States v. Fassnacht, 332 F.3d 440, 444--45 (7th Cir. 2003). Cavanaugh does not dispute that the Indictment satisfies this standard. See, e.g., United States v. Stout, 965 F.2d 340, 344--45 (7th Cir. 1992) (upholding indictment that stated the mail fraud elements (a scheme to defraud and use of the mails to further that scheme), and fairly apprised the defendant of the factual predicate for the charge). Instead, Cavanaugh asks ...


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