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United States v. Firtash

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

June 21, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
DMITRY FIRTASH, aka “Dmytro Firtash, ” and “DF, ” and ANDRAS KNOPP, Defendants.

          MEMORANDUM ORDER AND OPINION

          REBECCA R. PALLMEYER, UNITED STATES DISTRICT JUDGE

         Defendants Dmitry Firtash and Andras Knopp were indicted in 2013 on charges that they made use of United States financial institutions to bribe Indian public officials. Allegedly, these bribes were intended to secure approvals for a mining project in India (hereinafter “the Project”), many products of which would then be sold to a company headquartered in Chicago. Neither Defendant has appeared in court to answer these charges. Firtash, a Ukrainian citizen, currently resides in Austria, where extradition proceedings are pending. Knopp, a Hungarian citizen, currently resides in Russia, with which the United States has no extradition agreement. Defendants move to dismiss the Indictment on several bases: (1) that the court lacks venue, (2) that the Indictment fails to state an offense, and (3) that prosecution would violate their rights under the Fifth Amendment Due Process Clause. For the reasons stated herein, Defendants' motions are denied.

         BACKGROUND

         I. The Allegations

         At the heart of this case is the proposed sale of titanium sponge to an American company headquartered in Chicago. Titanium is an abundant element present in a variety of minerals, including ilmenite, [1] which can be found along the Indian coastline.[2] Mining in India requires certain licenses, however, which must be approved by the Indian central and local governments. (Indictment [2] at 3.) In this case, the United States has charged six Defendants, including Firtash and Knopp, with conspiring to obtain these licenses by bribing two Indian public officials: Y.S. Rajasekhara Reddy, Chief Minister of the State of Andhra Pradesh;[3] and K.V.P. Ramachandra Rao, a state official and close advisor to Reddy. (Indictment [2] at 2, 6.) According to the government, Defendants and their associates aimed to obtain a profit by processing this ilmenite into a product known as “titanium sponge” and then selling it to a United States company (“Company A”). (Id. at 2-3.) A memorandum of agreement was allegedly signed to provide Company A with five to twelve million pounds of titanium sponge annually. (Id. at 3.)

         In connection with the Project, Defendants Firtash and Knopp allegedly worked with at least four co-conspirators: Suren Gevorgyan, Gajendra Lal, Periyasamy Sunderalingam, and K.V.P. Ramachandra Rao. (Id. at 1, 5). All four are named as co-defendants and remain at large. (Id. at 1.) Firtash is alleged to have been the leader of this group. (Id. at 5, 6-7.) In this capacity, he is alleged to have met with Indian public officials to discuss the Project, authorized the payment of bribes to Indian public officials, and directed subordinates, including Knopp, to carry out the logistics of paying those bribes. (Id. at 6-7.) Knopp, too, is alleged to have “occupied a supervisory role.” (Id.) He allegedly met with Indian public officials and directed the activities of co-conspirators. (Id.) Additionally, Knopp is alleged to have met personally with representatives of Company A to discuss the sale of titanium products. (Id.)[4]

         Much of the relevant conduct is alleged to have taken place abroad, although several allegations against Firtash, Knopp, and their purported co-conspirators involve the United States. For example, several co-conspirators allegedly attended meetings with representatives of Company A, which is incorporated in Delaware and has its principal executive offices in Chicago, Illinois. (Id. at 2.). Two of these meetings, purportedly attended by Gevorgyan, allegedly took place in Seattle, Washington. (Id. at 17.) Another named co-conspirator, Lal, allegedly traveled interstate at least five times in June, July, and August 2009. (Id. at 17-18.) The alleged purpose of one of these trips, from Greensboro, North Carolina to Flushing, New York on July 14, 2009, was to solicit the participation of another company (“Company D”) in the Project. Additionally, an unidentified co-conspirator allegedly used a cellphone located in Chicago, Illinois to discuss that conspirator's activities related to the project and “direct future activity.” (Id. at 19.) Finally, United States financial institutions were allegedly utilized to transfer several million dollars of bribe payments before they reached Indian public officials. (Id. at 6.)

         II. The Indictment

         On June 30, 2013, the government filed a five-count indictment against the six alleged conspirators, including Firtash and Knopp. (Indictment [2] at 1.)

         Count One charges a conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(d). (Id. at 1-19.) It alleges that the six alleged conspirators, acting as a criminal enterprise, conspired to engage in racketeering activity. (Id. at 5-11.) Specifically, the Indictment charges that in planning to bribe Indian public officials, the enterprise conspired to engage in acts that would violate two federal statutes: the Money Laundering Control Act (the “MLCA”), 18 U.S.C. § 1956, which criminalizes the laundering of monetary instruments, and the Travel Act, 18 U.S.C. § 1952, which criminalizes travel from one state to another to promote or facilitate unlawful activity. (Id. at 10-11.)

         Count Two charges a conspiracy to violate the MLCA that relates to the same conduct, and Counts Three and Four charge conspiracy and aiding and abetting Travel Act violations.[5](Id. at 20-23.)

         Count Five charges Firtash, Knopp, Gevorgyan, Lal, and Sunderalingam with conspiracy and with aiding and abetting a violation of the Foreign Corrupt Practices Act (the “FCPA”), 15 U.S.C. §§ 78dd-2(a) and 78dd-3(a), which criminalizes the payment of money by a “domestic concern” to a “foreign official” for the purpose of influencing an official act. (Id. at 24-27.) It alleges that Lal, a permanent resident of the United States, was a “domestic concern” within the meaning of the FCPA, [6] and that the targets of bribery, Rao and Reddy, were both “foreign officials” under the Act. (Id. at 5, 24.) In summary, the factual allegation is that Firtash, Knopp, and others conspired to influence the decision-making of foreign public officials through the payment of bribes, and that this would be done using instruments of interstate commerce and while in the territory of the United States. (Id. at 25-27.)

         Notably, the Indictment does not allege that Firtash or Knopp were ever physically present in the United States, either in connection with or unrelated to the Project. The government has since alleged that it has evidence showing Knopp took an act to further the conspiracy while he was physically present in the United States, although it has not specified what this act was. (See Gov't's Resp. [40] at 79 n.40; Gov't's 2nd Supp. Resp. [70] at 2.)

         III. Post-Indictment Proceedings

         Neither Firtash, Knopp, nor any other Defendant has appeared before this court since the filing of the Indictment.

         On March 12, 2014, Firtash was arrested in Vienna by Austrian law enforcement on request of the United States. (Gov't's Resp. [40] at 5.) He was released on bond several days later, but barred from leaving Austria. (Id.) The United States thereafter submitted a request to the Republic of Austria to extradite Firtash, which was denied by the Vienna Regional Court for Criminal Matters on April 30, 2015. (Id. at 6.) The Austrian government appealed this decision to the Vienna Higher Regional Court, which reversed the decision of the lower court on February 21, 2017, ordering Firtash be extradited to the United States. (Id. at 6.)[7]

         Firtash submitted a writ to the Austrian Supreme Court requesting a “retrial.”[8] (Webb Letter 1 [56] at 1.) On December 12, 2017, the Austrian Supreme Court stayed Firtash's extradition pending its decision on Firtash's writ. That decision was itself delayed pending a ruling by the Court of Justice of the European Union (the “CJEU”) on whether the EU Charter on Human Rights applies to Firtash's appeal. (Id. at 2.) On October 24, 2018, the CJEU issued its ruling. Case C-234/17, XC and Others, http://curia.europa.eu/juris/document/document.jsf? text=&docid=206981.[9] The Austrian Supreme Court has not yet ruled on Firtash's writ.

         During the course of all of these proceedings, on May 9, 2017, Firtash filed a motion in this court to dismiss the Indictment. (Firtash MTD [24].) On May 15, 2017, Knopp joined Firtash's motion.[10] (Knopp MTD [30].)

         DISCUSSION

         I. Venue

         Defendants first argue that the court lacks venue over the charges in the Indictment.

         The federal government may only try a criminal defendant in a state and district where the charged offense was committed. U.S. Const. art. III, § 2, cl. 3; id. at amend. XI; Fed. R. Crim. P. 18. Except in cases where Congress has “specifically defined where a crime should be deemed to have occurred, ” courts determine whether venue is proper by considering “the nature of the crime alleged and the location of the act or acts constituting it.” United States v. Clark, 728 F.3d 622, 623-24 (7th Cir. 2013) (quoting United States v. Tingle, 183 F.3d 719, 726 (7th Cir. 1999)). This “substantial contacts” approach is not a rigid test, but rather a “general guide” that courts follow to ensure that “a particular jurisdiction can serve as the venue for a federal criminal trial in a manner consistent with the guarantees of the constitutional venue provisions.” United States v. Muhammad, 502 F.3d 646, 655 (7th Cir. 2007). The flexibility of this guidance reflects a concern that “an overly mechanistic approach to the location of the defendant's acts may limit unrealistically the permissible venues in terms of the policy concerns that underlie the constitutional venue guarantee.” Id. at 654.

         Applying the substantial contacts approach to cases of criminal conspiracy, the Seventh Circuit has recognized several different adequate bases for venue. The “traditional rule” for such cases is that venue is proper in “any district in which an overt act of the conspiracy occurred, ” even if there is no evidence that the defendant ever entered that district or that the conspiracy was formed there. United States v. Ochoa, 229 F.3d 631, 636-37 (7th Cir. 2000) (citing United States v. Rodriguez-Moreno, 526 U.S. 275, 281-82 (1999)).[11] Additionally, venue is proper in the district where an overt act was “intended to have an effect.” United States v. Muhammad, 502 F.3d 646, 655 (7th Cir. 2007) (emphasis omitted) (quoting United States v. Frederick, 835 F.2nd 1211, 1215 (7th Cir. 1987)); cf. Id. at 654 (quoting United States v. Reed, 773 F.2d 477, 482 (2d Cir. 1985)) (“[P]laces that suffer the effects of a crime are entitled to consideration for venue purposes.”).

         Where a defendant challenges venue, the government bears the burden of proving venue is proper for each count charged. United States v. Tingle, 183 F.3d 719, 726-27 (7th Cir. 1999). In doing so, it may rely only on the allegations in the Indictment, accepting all the alleged facts as true. United States v. Clark, 728 F.3d 622, 623 (7th Cir. 2013); see also United States v. Bohle, 445 F.2d 54, 59 (7th Cir. 1971) (“An Indictment alleges proper venue when it alleges facts which, if proven, would sustain venue.”), overruled on other grounds by United States v. Lawson, 653 F.2d 299 (7th Cir. 1981).

         The government has met that generous test. Because the Seventh Circuit recognizes venue in cases of criminal conspiracy where the illegal activity was “intended to have an effect” in the district, United States v. Muhammad, 502 F.3d 646, 655 (7th Cir. 2007) (emphasis omitted) (quoting United States v. Frederick, 835 F.2nd 1211, 1215 (7th Cir. 1987)), the Indictment here need only allege that the charged conspiracy was intended to have an effect in the Northern District of Illinois. It does so, describing a conspiracy to, by illegal means, obtain and sell five to twelve million pounds of titanium sponge to Company A, a company with its principal place of business in Chicago, Illinois. (Indictment [2] at 3). The completion of this transaction was the object of each of the crimes charged: the alleged RICO conspiracy, the alleged conspiracy to violate the MLCA, the alleged conspiracy and aiding and abetting Travel Act violations, and the alleged conspiracy to violate the FCPA, are all alleged to have been aimed at the end of ultimately completing the transaction with Company A. This is sufficient for the government to meet its burden. In light of this conclusion, the court need not address the government's alternative argument that a co-conspirator's use of a cellphone in Chicago provides an independent basis for venue.

         Defendants urge that the court consider an additional “foreseeability” requirement, arguing that the Indictment does not allege that it was foreseeable to Defendants “that a coconspirator was ever in the Northern District of Illinois or that a cell phone was used there.” (Firtash MTD [24] at 7.) They cite a concurring opinion from Andrews v. United States, in which Judge Cudahy wrote that “[i]t would seem . . . to violate basic concepts of criminal responsibility and due process to deem a crime committed at places unknown to the defendant, places the very existence of which he may not have had any reason to suspect.” 817 F.2d 1277, 1282 (7th Cir. 1987).

         This argument fails for multiple reasons. First, Judge Cudahy's concurrence was expressly not the holding of the Seventh Circuit, as he acknowledged himself that he “would go further” in setting venue requirements than the other two judges of the panel. Andrews, 817 F.2d 1281. Moreover, the application of such a test would not necessarily preclude a finding of venue in this case. Surely, Firtash and Knopp's alleged participation in the conspiracy-which included receiving status reports from subordinates-suffices to suggest that they were aware that the object of the conspiracy was to sell titanium products to Company A, and that Company A had its principal executive offices in Chicago, Illinois. (Indictment [2] at 8.) These facts, if true, would give both Firtash and Knopp “reason to suspect” that they may be called to this district to account. Andrews, 817 F.2d at 1282.

         Accordingly, Defendants' venue objection is overruled.

         II. Failure to State an Offense - Count One

         Defendants next ask the court to dismiss Count One of the Indictment-which charges Defendants with participation in a RICO conspiracy, in violation of 18 U.S.C. § 1962-on the ground that it impermissibly targets extraterritorial conduct. Defendants argue that § 1962 only applies to the racketeering activity of a foreign enterprise acting abroad if the enterprise causes a significant effect on U.S. commerce, and contend that the Indictment should be dismissed because it “does not set forth sufficient facts to establish” such an effect. (Firtash MTD [24] at 10.) Defendants further argue that the RICO predicate statutes upon which Count One is based are not, themselves, applicable extraterritorially in this case, and therefore cannot sustain an extraterritorial application of RICO.

         In assessing this argument, the court notes the limited purpose indictments are intended to serve: “inform[ing] the defendant of the nature of the accusation against him.” Russell v. United States, 369 U.S. 749, 767 (1962). Unlike civil complaints, which must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face, '” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), “[i]ndictments need not exhaustively recount the facts surrounding a crime's commission, ” United States v. Agostino, 132 F.3d 1183, 1189 (7th Cir. 1997). Indeed, the Seventh Circuit maintains that an indictment is generally sufficient so long as it accomplishes three functions: “it must set out each of the elements of the crime to be charged; it must provide adequate notice of the nature of the charge so that the accused may prepare a defense; and it must allow the defendant to raise the judgment as a bar to future prosecutions for the same offense.” United States v. Barrios-Ramos, 732 Fed.Appx. 457, 459 (7th Cir. 2018).

         “Because a court's ‘use[ ] [of] its supervisory power to dismiss an indictment . . . directly encroaches upon the fundamental role of the grand jury,' dismissal is granted only in unusual circumstances.” United States v. Ballestas, 795 F.3d 137, 148 (D.C. Cir. 2015) (quoting Whitehouse v. U.S. Dist. Court, 53 F.3d 1349, 1360 (1st Cir.1995)). On a motion to dismiss, courts review indictments “on a practical basis and in their entirety, rather than in a hypertechnical manner, ” United States v. Cox, 536 F.3d 723, 726 (7th Cir. 2008) (quoting United States v. Harvey, 484 F.3d 453, 456 (7th Cir. 2007)), and assume all facts asserted therein to be true. See Boyce Motor Lines v. United States, 342 U.S. 337, 343 n.16 (1952).

         When a defendant moves to dismiss an indictment as impermissibly extraterritorial, this practice of deferring to the province of the grand jury must be reconciled with the longstanding principle that “in general, ‘United States law governs domestically but does not rule the world.'” RJR Nabisco, Inc. v. European Cmty., 136 S.Ct. 2090, 2100 (2016) (quoting Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 454 (2007)). The D.C. Circuit's opinion in United States v. Ballestas illustrates this. Ballestas, a Colombian citizen, was indicted under the Maritime Drug Law Enforcement Act (the “MDLEA”), 46 U.S.C. §§ 7503(a), 70506(b), which criminalizes “conspiring to distribute drugs ‘on board . . . a vessel subject to the jurisdiction of the United States' . . . .” Ballestas, 795 F.3d at 142 (quoting 46 U.S.C. §§ 7503(a), 70506(b)). The indictment alleged that the relevant vessel was “subject to the jurisdiction of the United States”-meeting a statutory requirement for extraterritorial application of the MDLEA-but did not allege facts substantiating this claim. See Indictment at 2, No. 1:11-cr-00050-RWR (D.D.C. Feb. 23, 2011). Indeed, the indictment alleged few specific facts at all, consisting of little more than the defendants' names and the statutory language of the MDLEA. Id. at 1-3.

         Ballestas moved to dismiss the indictment arguing, inter alia, “that the MDLEA's conspiracy provision did not extend extraterritorially to reach individuals (like Ballestas) who never came ‘on board' [a vessel subject to the jurisdiction of the United States].” Id. (quoting 46 U.S.C. § 70503(a)); see also Defendant's Reply to Government's Response to Motion to Dismiss the Indictment, No. 1:11-cr-00050-RWR (D.D.C. Oct. 26, 2012). Without an evidentiary hearing, the district court denied Ballestas' motion, concluding “that the conspiracy provision of the MDLEA applied extraterritorially to Ballestas' actions in Colombia.” Ballestas, 795 F.3d at 142-43, 148. In reaching this conclusion, the court relied on a proffer by the government that the relevant vessel was a “vessel without nationality, ” which, by statute, would make it a “vessel subject to the jurisdiction of the United States.” Id. at 148. Ballestas entered a conditional plea of guilty, and argued on appeal that because the government did not prove beyond a reasonable doubt that the relevant vessel was “subject to the jurisdiction of the United States, ” the indictment should have been dismissed as impermissibly extraterritorial. Id. at 141, 148; see also Opening Brief of Appellant at 24-27, United States v. Ballestas, 795 F.3d 138 (D.C. Cir. 2015) (No. 13-3107), 2014 WL 2635088. The D.C. Circuit rejected this argument out of hand, writing that it “fundamentally misperceives the nature of a motion to dismiss an indictment.” Ballestas, 795 F.3d at 148. Noting that an indictment “need only contain ‘a plain, concise, and definite written statement of the essential facts constituting the offense charged, ” id. at 149 (quoting Fed. R. Crim. P. 7(c)), and that “[w]hen considering a motion to dismiss an indictment, a court assumes the truth of those factual allegations, ” id. at 149, the D.C. Circuit held that the district court “did not err when it assumed the truth of the government's proffered facts in denying Ballestas's motion, including with regard to whether the pertinent vessel was subject to the jurisdiction of the United States, ” id.

         As Ballestas illustrates, a pre-trial motion to dismiss an indictment is not a means through which to dispute the government's allegations or demand the presentation of all relevant facts. Although the government may only charge extraterritorial conduct that falls within the purview of a statute, an indictment is not necessarily rendered insufficient for lack of factual allegations conclusively demonstrating the requisite connection. And where there is a credible disagreement over what conduct the government is criminally charging, or whether that conduct falls within the extraterritorial scope of a statute, it is not impermissible for the court to reach beyond the indictment to factual allegations in the government's pleadings. With these principles in mind, the court turns to the substance of Defendants' arguments on extraterritoriality.

         A. RJR Nabisco

         The Supreme Court addressed the extraterritoriality of RICO's substantive provisions, §§ 1962(a)-(c), in RJR Nabisco, Inc. v. European Community, 136 S.Ct. 2090 (2016). In that case, the European Community brought a civil RICO action against RJR Nabisco, a New York-based cigarette manufacturer, alleging that RJR engaged in racketeering activity-including money laundering, material support to foreign terrorist organizations, mail fraud, wire fraud, and violations of the Travel Act-in its dealings with drug traffickers and money launders in South American and Russia. Id. at 2098-99, 2105. The district court, finding that the only racketeering alleged in the complaint occurred outside the United States, and holding that RICO has no extraterritorial application, dismissed the civil RICO claims. Id. at 2099. The Second Circuit reversed and reinstated the claims, concluding that Congress manifested an intent for certain RICO predicates to apply extraterritorially, and finding that allegations contained in the complaint fell within their purview. Id. On certiorari to the Supreme Court, RJR Nabisco argued that RICO had no extraterritorial application, reaching neither foreign enterprises nor foreign injuries. See Brief for Petitioners at 24-56, RJR Nabisco, Inc. v. European Community, 136 S.Ct. 2090 (2016), (No. 15-138).

         The Court began its analysis by following a “two-step framework for analyzing extraterritoriality issues, ” asking first whether the “presumption against extraterritoriality has been rebutted-that is, whether the statute gives a clear affirmative indication that it applies extraterritorially.” Id. at 2101. Based on Congress's incorporation of extraterritorial predicates, the Court found that the presumption was rebutted, “but only with respect to certain applications of the statute.” Id. Specifically, it held that a RICO violation “may be based on a pattern of racketeering that includes predicate offenses committed abroad, provided that each of those offenses violates a predicate statute that is itself extraterritorial.” Id. at 2103.

         The Court further stressed that, under its holding, not every foreign enterprise would qualify for prosecution under RICO; RICO's substantive provisions by their own terms require proof of an enterprise that is “engaged in, or the activities of which affect, interstate or foreign commerce.” Id. at 2105 (quoting 18 U.S.C. §§ 1962(a)-(c). The Court thus cautioned that a foreign RICO enterprise “must engage in, or affect in some significant way, commerce directly involving the United States.” Id. at 2105. It continued, “Enterprises whose activities lack that anchor to U.S. commerce cannot sustain a RICO violation.” Id.

         Significantly, the Court expressly confined this analysis to RICO's substantive provisions. The Court voiced the possibility that § 1962(d), the RICO section at issue in this case, “should be treated differently from the provision (§ 1962(a), (b), or (c)) that a defendant allegedly conspired to violate, ” but the Court did not flesh out this possibility. Id. at 2103. Instead, it “assumed without deciding that § 1962(d)'s extraterritoriality tracks that of the provision underlying the alleged conspiracy.” Id.

         B. Effect on United States Commerce

         Defendants now ask this court to extend RJR Nabisco's holding beyond RICO's substantive provisions to its conspiracy provision, § 1962(d). Defendants first contend that the RJR Nabisco Court's comment on the effect of its holding on foreign enterprises-that for such an enterprise to fall within RICO's purview, it “must engage in, or affect in some significant way, commerce directly involving the United States”-applies without modification to RICO conspiracy cases. Defendants therefore argue that the Indictment is insufficient in that it “does not set forth sufficient facts to establish an enterprise significantly affecting United States commerce.” (Firtash MTD at 9-10.) But this appears to be an overstatement of the Court's holding in RJR Nabisco; as discussed above, the Court there explicitly reserved judgment on the extraterritorial application of § 1962(d). Indeed, the segment of the opinion to which Defendants refer is a discussion of RICO's substantive provisions, §§ 1962(a)-(c), which expressly “require[ ] proof of an enterprise that is ‘engaged in, or the activities of which affect, interstate or foreign commerce.'” Id. at 2105 (quoting 18 U.S.C. 1962(a)-(c)). No. such language appears in § 1962(d), which criminalizes conspiracy to violate one of the substantive provisions, and thus only requires proof “[t]hat the activities of [the enterprise] would affect interstate commerce.” Pattern Criminal Jury Instructions of the Seventh Circuit 549 (2017) (emphasis added).

         In essence, Defendants are arguing that § 1962(d) should cease to be read as a conspiracy statute when applied extraterritorially, and instead should be interpreted to criminalize only activity that has already had its intended effect on U.S commerce. That result is not compelled by RJR Nabisco, however, and is inconsistent with decades of Supreme Court precedent holding that an agreement to commit an unlawful act “is ‘a distinct evil,' which ‘may exist and be punished whether or not the substantive crime ensues.'” United States v. Jimenez Recio, 537 U.S. 270, 274 (2003) (quoting Salinas v. United States, 522 U.S. 52, 65 (1997)). Consistent with this principle, the Court's holding in RJR Nabisco, and the express language of ยง 1962(d), this court finds that the ...


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