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United States v. O'Brien

United States District Court, N.D. Illinois, Eastern Division

November 9, 2017

United States of America, Plaintiff,
v.
Jessica O'Brien and Maria Bartko, Defendants

          MEMORANDUM OPINION AND ORDER

          Honorable Thomas M. Durkin United States District Judge

         Defendants Jessica Arong O'Brien and Maria Bartko are charged with engaging in a scheme to defraud lenders and obtain money and property from lenders through materially false pretenses and representations. The indictment alleges in Count I that defendants committed mail fraud in violation of 18 U.S.C. § 1341, and in Count II that defendants committed bank fraud in violation of 18 U.S.C. § 1344. The indictment also contains a forfeiture allegation.

         Before the Court is defendant O'Brien's motion to dismiss Counts I and II of the indictment on duplicity grounds (R. 45). O'Brien argues that in both Counts I and II, the government has improperly joined four separate offenses into a single scheme to avoid the statute of limitations that would otherwise apply to bar the first three offenses. O'Brien claims the indictment is therefore duplicitous and prejudicial to her in a number of ways. Because this Court finds that the indictment fairly alleges a scheme and that potential prejudices can be effectively mitigated at trial, it denies O'Brien's motion to dismiss (R. 45).

         Standard

         “Challenging an indictment is not a means of testing the strength or weakness of the government's case, or the sufficiency of the government's evidence.” United States v. Moore, 563 F.3d 583, 586 (7th Cir. 2009) (internal quotation marks omitted). Rather, a motion to dismiss seeks to correct a defect in the indictment, such as “duplicity.” Fed. R. Crim. P. 12(b)(3)(B)(i).

         “Duplicity is the joining of two or more offenses in a single count.” United States v. Hughes, 310 F.3d 557, 560 (7th Cir. 2002) (quotation marks and citation omitted). “The overall vice of duplicity is that the jury cannot in a general verdict render its finding on each offense, making it difficult to determine whether a conviction rests on only one of the offenses or both.” United States v. Buchmeier, 255 F.3d 415, 425 (7th Cir. 2001) (quotation marks and citation omitted). In addition to jury confusion, “a duplicitous indictment may expose a defendant to other adverse effects including improper notice of the charges against him, prejudice in shaping of evidentiary rulings, in sentencing, in limiting review on appeal, and in exposure to double jeopardy.” Id. (quotation marks omitted).

         An indictment is not duplicitous, however, if it charges a single offense carried out through different means. United States v. Berardi, 675 F.2d 894, 897 (7th Cir. 1982). Federal Rule of Criminal Procedure 7(c)(1) provides that “[a] count may allege that . . . the defendant committed [an offense] by one or more specified means.” “The line between multiple offenses and multiple means to the commission of a single continuing offense is often a difficult one to draw, ” and “[t]he decision is left, at least initially, to the discretion of the prosecution.” United States v. Davis, 471 F.3d 783, 791 (7th Cir. 2006) (quotation marks omitted). “Where the indictment ‘fairly interpreted' alleges a ‘continuing course of conduct, during a discrete period of time, ' the indictment is not prejudicially duplicitous.” Id. at 790-91 (quoting Berardi, 675 F.2d at 898). More generally, the Seventh Circuit has held that “an indictment is legally sufficient” for purposes of Rule 7(c)(1) “if (1) it states all the elements of the crime charged, (2) adequately informs the defendant of the nature of the charges against him, and (3) allows the defendant to assert the judgment as a bar to future prosecutions of the same offense.” United States v. Vaughn, 722 F.3d 918, 925 (7th Cir. 2013).

         Analysis

         “Duplicity is not always fatal to an indictment.” United States v. Steurer, 942 F.Supp. 1183, 1186 (N.D. Ill. 1996). Accordingly, this Court “first determine[s] whether the counts at issue are duplicitous, ” and then turns to the question of whether, in any event, “other measures can cure any prejudice that might exist.” Id.

         I. Duplicity of Indictment

         Both Counts I and II of the indictment in this case allege a three-year scheme to defraud, causing lenders to issue and refinance loans related to two investment properties that O'Brien owned on the south side of Chicago. R. 1. The indictment alleges that this scheme was comprised of four transactions: (1) in 2004, O'Brien “fraudulently obtained mortgage loan proceeds to purchase an investment property located at 625 West 46th Street” by submitting mortgage documents with false statements regarding her income and liabilities; (2) in 2005, O'Brien, with Bartko as the loan originator, “fraudulently refinanced her mortgage loans on the 46th Street property and on a second investment property located at 823 West 54th Street” by submitting applications with false statements regarding O'Brien's income and employment; (3) in 2006, O'Brien “fraudulently obtained a commercial line of credit” by submitting an application with false statements about her realty company's revenue and profit “and used those loan proceeds to maintain the 46th Street and 54th Street properties”; and (4) in 2007, O'Brien and Bartko “agreed that O'Brien would sell the 46th Street and 54th Street properties to Bartko” using “a straw buyer whom O'Brien and Bartko knew would be fraudulently qualified for mortgage loans.” Id. at 4-7. For each of Counts I and II, the indictment alleges only one “execut[ion]” of the scheme-a single fraudulent mailing during the 2007 transaction in Count I and a single fraudulent issuance of a mortgage loan by a lender during the 2007 transaction in Count II. Id. at 9-10.

         O'Brien maintains that each of the four transactions alleged in the indictment to comprise a scheme constitutes a separate offense, and that the indictment thus improperly “join[s] . . . two or more offenses in a single count.” See Hughes, 310 F.3d at 560. But the question of whether these transactions could have been charged as separate offenses is not dispositive of duplicity. “[T]wo or more acts, each one of which would constitute an offense standing alone, may be joined in a single count without offending the rule against duplicity.” Berardi, 675 F.2d at 898. In the context of mail and bank fraud specifically, for which the statutes criminalize each “execut[ion]”[1] of a scheme, the Seventh Circuit has made clear that although “for each count of conviction, there must be an execution, ” “the law does not require the converse: each execution need not give rise to a charge in the indictment.” United States v. Hammen, 977 F.2d 379, 383 (7th Cir. 1992). In other words, “an act which can be viewed as an independent execution of a scheme” and thus charged as a separate count does not need to be charged in a separate count. United States v. King, 200 F.3d 1207, 1213 (9th Cir. 1999) (citing United States v. Bruce, 89 F.3d 886, 889-90 (D.C. Cir. 1996)).

         If several fraudulent executions are part of the same scheme, the government thus has discretion to (a) charge each execution in a separate count or (b) “allege only one execution of an ongoing scheme that was executed numerous times.” Hammen, 977 F.2d at 383; accord Bruce, 89 F.3d at 889-90 (denying motion to dismiss an indictment as duplicitous where it alleged “four separate loan applications each as one ‘part'” of an “overall scheme” because the government “‘carefully crafted the indictment to allege only one execution of an ongoing scheme that was executed numerous times'”) (quoting Hammen, 977 F.2d at 383).

         The government here chose the latter route. The indictment alleges only one execution in each Count: (1) in Count I, it alleges that a mailing on April 16, 2007 of a payoff check relating to the straw buyer's purchase of the 46th Street property constituted mail fraud in violation of 18 U.S.C. § 1341; and (2) in Count II, it alleges that the funding of a mortgage by Citibank, N.A. on April 16, 2007 for the straw buyer's purchase of the 46th Street property constituted bank fraud in violation of 18 U.S.C. § 1344. R. 1 at 9, 10.[2] And it describes the 2004, 2005, and 2006 transactions as part of a scheme rather than as separate executions of bank or mail fraud. See R. 1.

         The fact that the indictment clearly charges only one execution in each count goes a long way toward satisfying Rule 7(c)(1)'s requirement of “adequately inform[ing] the defendant of the nature of the charges against h[er].” Vaughn, 722 F.3d at 925. It also distinguishes this case from United States v. Tanner, 471 F.2d 128 (7th Cir. 1972), on which O'Brien relies. In Tanner, the Seventh Circuit held that an indictment was duplicitous where the government had “delineate[d] as a single offense all trips [transporting explosives across state lines] that occurred within a period of time” without “defining at what point the act of transporting explosives is completed” or which trip completed it. Id. at 138-39; see also United States v. Schock, 2017 WL 4780614, at *20-21 (C.D. Ill. Oct. 23, 2017) (dismissing theft of government funds count as duplicitous where “the Government has made it impossible for Defendant (and the court) to determine which disbursement” of the numerous disbursements alleged “gave rise to the allegations” in that count).

         Throughout her filings, O'Brien makes much of the likely reason the government chose to proceed this way: the 2004, 2005, and 2006 transactions would have been outside the statute of limitations if charged separately. But as long as they are part of the same scheme, this choice was within the government's discretion. See, e.g., Hammen, 977 F.2d at 383; United States v. Longfellow, 43 F.3d 318, 322-25 (7th Cir. 1994) (“only one or two executions fell within the Statute of Limitations, ” but that “does not detract from the entire pattern of loans[ ] being a scheme, and renders Longfellow no less culpable for that entire scheme”); United States v. Mermelstein, 487 F.Supp.2d 242, 254 (E.D.N.Y. 2007) (rejecting argument that “executions” of fraud completed outside the statute of limitations “are barred, ” because a fraud indictment “may properly charge, in a single count, a pattern of executions . . . as part of a single, overarching continuing scheme”).

         The crucial question therefore becomes whether the 2004, 2005, 2006, and 2007 transactions are all fairly alleged to be part of a single scheme to defraud. SeeDavis, 471 F.3d at 790-91 (“an indictment can be duplicitous if numerous discrete instances of criminal conduct are lumped into a single count, ” but this is not the case if the indictment, “fairly interpreted, ” alleges a scheme) (quotation marks omitted); United States v. Zeidman, 540 F.2d 314, 317 (7th Cir. 2006) (the fact that “each of the frauds . . . could constitute a separate offense” was “not determinative” of duplicity where each count “charges only one mailing” and alleges a scheme). Although “[a]s its ordinary meaning suggests, the term ‘scheme to defraud' describes a broad range of conduct, ” United States v. Doherty, 969 F.2d 425, 429 (7th Cir. 1992), a scheme is generally ...


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