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United States v. Blase

October 24, 2007

UNITED STATES OF AMERICA,
v.
NICHOLAS B. BLASE ET AL.



The opinion of the court was delivered by: Wayne R. Andersen District Judge

MEMORANDUM OPINION AND ORDER

This matter is before the court on defendant Nicholas Blase's motion to dismiss the government's superseding indictment pursuant to Federal Rules of Criminal Procedure 7 and 12 or, alternatively, to strike Illinois state law related allegations contained within that indictment. For the following reasons, defendant's motion to dismiss is denied. The court refrains from ruling on defendant's arguments regarding references to Illinois state laws at this time.

BACKGROUND

In December, 2005, the Grand Jury returned an eleven-count superseding indictment (the "indictment") against defendant Nicholas Blase ("Blase") alleging that Blase misused his official government position for private gain in violation of the federal mail fraud statute and that Blase filed false federal income tax returns for the years 2000 through 2005. Specifically, the indictment alleges that from around 1974 to June 2006 Blase used his position as the Mayor of the Village of Niles, Illinois in a variety of ways to assist Ralph Weiner and Associates ("RWA"), an insurance broker once located in Niles and later relocated to Wheeling, Illinois, to obtain and keep Niles businesses as customers. In return, RWA allegedly took a percentage of the monies it received from these Niles businesses and paid that percentage as a kickback to Blase through S.M.P. Insurance Service, Inc. ("SMP"), which the indictment alleges was a sham corporation created and maintained for Blase's benefit. The indictment alleges that throughout this scheme, Blase failed to disclose his receipt of these payments to the public and, in fact, took numerous steps to conceal the true nature of his kickback arrangement with RWA. Counts one through five of the indictment charge Blase with violating the federal mail fraud statute, 18 U.S.C. §§ 1341, 1346, 2, by depriving the citizens of Niles of Blase's honest services as Mayor. Counts six through eleven charge Blase with willfully and knowingly filing false federal tax returns for the years 2000 to 2005 in violation of 26 U.S.C. § 7206(1) by failing to report as "Other Income" the payments that Blase allegedly received from RWA. Blase has moved to dismiss the indictment in its entirety.

DISCUSSION

A. Standard of Review

Federal Rule of Criminal Procedure 12(b)(2) provides that "[a] party may 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). When considering a motion to dismiss under Rule 12(b)(2), a court assumes all facts in the indictment as true and must "view all facts in the light most favorable to the government." See United States v. Yashar, 166 F.3d 873, 880 (7th Cir. 1999). When viewed in that light, an indictment is sufficient if it satisfies three constitutionally-mandated requirements. United States v. Anderson, 280 F.3d 1121, 1124 (7th Cir. 2002). First, the indictment must adequately state all of the elements of the crime charged; second, it must inform the defendant of the nature of the charges so that he may prepare a defense; and finally, the indictment must allow the defendant to plead the judgment as a bar to any future prosecution for the same offense. Id. Thus, indictments "need not exhaustively recount the facts surrounding the crime's commission." United States v. Agostino, 132 F.3d 1183, 1189 (7th Cir. 1997). Rather, "when determining the sufficiency of an indictment, [a court] look[s] at the contents of the subject indictment 'on a practical basis and in [its] entirety, rather than in a hypertechnical manner.'" United States v. McLeczynsky, 296 F.3d 634, 636 (7th Cir. 2000) (quoting United States v. Smith, 230 F.3d 300, 305 (7th Cir. 2000)). An indictment, or a portion thereof, may be dismissed "if it is otherwise defective or subject to a defense that may be decided solely on issues of law." United States v. Black, 469 F. Supp. 2d 513, 518 (N.D. Ill. 2006).

B. Counts One through Five Properly Allege Mail Fraud

1. The Indictment Adequately Apprises Mr. Blase of the Charges Against Him

Blase argues that counts one through five of the indictment should be dismissed because those counts contain merely vague and generic allegations that are insufficient for Blase to adequately prepare a defense in this case or establish a double jeopardy defense in the future. An indictment for mail fraud is sufficient if it includes allegations that the defendant (1) participated in a scheme or artifice to defraud; (2) acted with an intent to defraud; and (3) used the mail in furtherance of the fraudulent scheme. United States v. Hausmann, 345 F.3d 952, 956 (7th Cir. 2003); see also 18 U.S.C. § 1341. Congress has defined "scheme or artifice to defraud" to include a scheme or artifice to deprive another of the intangible right of honest services. See 18 U.S.C. § 1346 ("Section 1346"); United States v. Segal, 495 F.3d 826, 834 (7th Cir. 2007). An honest services charge under Section 1346 requires an allegation that a defendant misused his office or position in furtherance of the scheme or artifice to defraud. United States v. Bloom, 149 F.3d 649, 655 (7th Cir. 1998).

Here, counts one through five of the indictment are factually sufficient to survive Blase's motion to dismiss. The indictment alleges that Blase entered into a scheme to defraud by using his official position as Mayor of Niles "to promote RWA and steer businesses to purchase insurance from RWA and, in return, [RWA] paid, and caused to be paid, a portion of RWA's commissions from Niles clients to SMP, a shell corporation controlled by defendant Blase." (Sup. Indict. P. 6). The indictment further identifies the key individuals and entities involved in the scheme, describes the actions and omissions allegedly taken by Blase, tracks the payments of alleged kickbacks received by Blase, including the manner in which the amounts were determined and directed to SMP, and alleges the precise dollar amount of the alleged kickbacks paid from 1997 to 2006. Counts one through five further allege that Blase knowingly used the mail in furtherance of his scheme. When read in the light most favorable to the government, these counts sufficiently allege that Blase misused his position as the Mayor of Niles for private gain in violation of the federal mail fraud statute and more than adequately apprise Blase of the charges against him.

2. The Indictment Need Not Allege Harm to the Victims

Blase next argues that the mail fraud counts in the indictment should be dismissed because they fail to allege that Blase misused his office at someone's expense. Specifically, Blase argues that when, as here, the government presents a deprivation of honest services theory under the mail fraud statute the indictment must allege some harm or intended harm to the victims of the scheme to defraud. This argument, however, is legally flawed. Although Blase correctly notes that not every breach of fiduciary duty constitutes a deprivation of honest services in violation of the mail fraud statute, Bloom, 149 F.3d at 655-56, the Seventh Circuit has held that a breach of fiduciary duty can violate the mail fraud statute when that breach is accompanied by a misuse of office or position. Id. at 655. Further, the Seventh Circuit has repeatedly held that "[t]here is no requirement under the law . . . that a co-conspirator to a wire and mail fraud scheme contemplate actual or foreseeable harm to the victim." Hausmann, 345 F.3d at 959; accord United States v. Leahy, 464 F.3d 773, 786-87 (7th Cir. 2006); United States v. Fernandez, 282 F.3d 500, 507 (7th Cir. 2002). Here, as explained supra, the indictment sufficiently alleges that Blase misused his position as Mayor of Niles for private gain. Thus, under Seventh Circuit precedent, the indictment sufficiently alleges a violation of the mail fraud statute under an honest services theory even without any allegation of harm or contemplated harm to the victims of Blase's alleged scheme.

Blase also makes the factual argument that counts one through five should be dismissed because there is no allegation that any of RWA's customers were harmed as a result of Blase's alleged scheme. Aside from being legally flawed because the government need not allege any such harm, this argument is also factually incorrect because it mistakenly assumes that the victims of Blase's alleged scheme are limited to RWA's customers. As the government correctly points out in its response to Blase's motion to dismiss, it is the entire citizenry of the Village of Niles, not just those businesses located within Niles, to whom Blase owed a duty of honest services. When viewed in the light most favorable to the government, the indictment alleges that Blase made decisions in his official capacity that affected the welfare of the citizens of Niles based upon Blase's own personal financial interests and not based on the public's welfare. Thus, the citizens of Niles were ...


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