United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
HARRY D. LEINENWEBER, District Judge.
Defendant's Motion to Sever [ECF No. 195] is granted. Defendant's Motion for Disclosure of Exculpatory and Impeaching Evidence [ECF No. 196] is denied. Defendant's Motion for Disclosure of Signed Indictment and Grand Jury Minutes [ECF No. 197] is granted in part. The Government shall submit, for in camera review, competent proof that the indictment in this case was returned by a Grand Jury whose term had not expired. Defendant's Motion to Dismiss Count Two of the Indictment [ECF No. 198] is granted.
Defendant Michele DiCosola (the "Defendant") stands accused of committing a variety of acts to defraud others and enrich himself. The allegations that follow are drawn exclusively from the eight-count indictment.
The first set of charges relates to fraudulent applications for loans. Defendant is alleged to have served as President of a business called "CD Shape Cutters." When acting in that capacity in July 2008, he submitted an application to Amcore Bank for two business loans (in the amounts of $250, 000 and $450, 000). To induce the bank to approve the application, he included false personal and business tax returns from 2006 and 2007 that inflated his income. The next month, Defendant submitted a mortgage application to CitiMortgage so that he could refinance his personal home mortgage and obtain a home equity loan. He supplemented his application in September 2008 by faxing CitiMortgage the same false tax returns from 2007 and 2008 that overstated his income. These loans were approved and funded shortly thereafter. Despite his guarantee of full and punctual payment, Defendant defaulted on the loans. Counts I and II charge bank fraud in violation of 18 U.S.C. § 1344 - one count for each business loan. Count III alleges that Defendant made a false statement to a bank in violation of 18 U.S.C. § 1014 in his pursuit of the business loans. Count IV charges wire fraud under 18 U.S.C. §§ 1343 and 1342 for the fax transmission of the false 2006 and 2007 tax returns used to obtain the personal loans.
Next, Counts V and VI charge Defendant with filing false claims against the United States in violation of 18 U.S.C. § 287. The indictment accuses Defendant of filing two false tax returns on September 15, 2009 - one for himself and one on behalf of behalf of taxpayer P.W. The fraudulent returns claimed entitlement to tax refunds of approximately $5.5 million and $385, 000. Although not mentioned in the indictment, the Court understands that Defendant's claim for a tax refund was based on an original issue discount ("OID") tax theory whereby a filer claims that numerous debts entitle him to a large refund from the IRS.
Finally, the indictment brings two Counts for bankruptcy fraud related to Defendant's two bankruptcy cases. First, on June 14, 2010, Defendant filed a Chapter 11 petition wherein he misrepresented whether he had closed financial accounts within the past year and whether he had served as an officer, director, partner, or managing director of a business within the past six years. Then, on November 2, 2010, Defendant filed another Chapter 11 petition in which he made those same misrepresentations. Counts VII and VIII relate to these two false petitions.
The case is scheduled for trial in September 2014. Now pending before the Court are Motions to Sever, for Disclosure of Exculpatory and Impeaching Evidence, for Disclosure of the Signed Indictment and Grand Jury Minutes, and to Dismiss - all filed by Defendant.
II. MOTION TO SEVER
Defendant argues that the charges in this case must be severed into three groups: Counts I-IV for bank fraud, Counts V-VI for tax fraud, and Counts VII-VIII for bankruptcy fraud. Rule 8(a) allows the Government to charge multiple counts in a single indictment if the offenses charged "are of the same or similar character, or are based on the same act or transaction, or are connected with or constitute parts of a common scheme or plan." FED. R. CRIM. P. 8(a). "Rule 8 should be broadly construed in order to increase judicial efficiency and to avoid costly and duplicative trials." United States v. Freland, 141 F.3d 1223, 1226 (7th Cir. 1998). The Government does not argue that the charges are based on the same act or transaction. Thus, of the grounds for joinder listed in Rule 8(a), only the first and third are at issue. If joinder is proper under Rule 8, then the Court will consider whether the charges should be severed under Rule 14(a) to avoid prejudice to the defendant.
A. Same or Similar Character
The Seventh Circuit has articulated two different approaches, both valid, to determining whether charges are "of the same or similar character." First, different charges are "of the same or similar character" if they "refer to the same type of offenses occurring over a relatively short period of time, and the evidence as to each count overlaps." United States v. Turner, 93 F.3d 276, 283 (7th Cir. 1996). Second, even if they are separate in time, charges can still be of the same or similar character if they share "categorical, not evidentiary, similarities." Id. Either way, the charges need not share an "identical statutory origin." United States v. Alexander, 135 F.3d 470, 476 (7th Cir. 1998).
Searching first for categorical similarities, the Court notes that all of the charges in this case involve a false statement made for financial gain. But how much deeper do the similarities extend? For the bank fraud charges, Defendant misrepresented his income and used false tax returns from 2007 and 2008 as verification. The tax fraud charges are based on false tax returns filed in September 2009 that listed numerous debts; there is no indication that Defendant misrepresented his income in those tax returns. In the bankruptcy filings, Defendant is alleged to have misrepresented his financial affairs by omitting details regarding closed accounts and his service as an officer of a business entity. Thus, the three sets of charges relate to three different types of misrepresentations: one about Defendant's income, another about his debts, and a third about his business affairs.
"Financial gain" is similarly broad and misleading. The different misrepresentations alleged in this case were in furtherance of attempts to obtain different types of financial help from different entities: the loan applications requested funds on credit from private banks, the tax returns claimed entitlement to cash refunds from the IRS, and Defendant's bankruptcy petitions asked for judicially-imposed relief from various creditors. Disparate charges can always be made to appear similar if the descriptive language employed is broad enough. Therefore, to measure whether charges are similar categorically, the Court must look for meaningful similarities. United States v. Kaquatosh, 227 F.Supp.2d 1045, 1047 (E.D. Wis. 2002) (explaining that "courts must be careful not to find similarity at a level of generality so high as to drain the term of any real content") (internal quotation omitted). In this case, the similarities are more superficial than substantial.
Other important differences are apparent. First, the misrepresentations related to different transactions: the bank fraud charges derive from Defendant's loan applications, the tax fraud charges stem from his false claims for refunds, and the false bankruptcy filings arise out of separate bankruptcy cases. Second, the misrepresentations were separated in time: the acts underlying the bank fraud charges took place between July 2008 and September 2008, the false tax returns were filed in September 2009, and the false bankruptcy filings were submitted in June 2010 and November 2010. The indictment alleges that the acts underlying the bank fraud charges were in furtherance of a scheme that continued until July 2010. But it is not clear what actions, other than Defendant's default on those loans, took place after September 2008; by then, Defendant had already made the false statements and obtained the loans. United States v. Anderson, 188 F.3d 886, 888 (7th Cir. 1999) (explaining that "the crime of bank fraud is complete when the defendant places the bank at a risk of financial loss, and not ...