The opinion of the court was delivered by: PENN
JOHN GARRETT PENN, District Judge.
This case is before the Court on the motion of the remaining defendant, Mary Treadwell,
to dismiss Counts 18-22 and 24 of the indictment.
The indictment charges Treadwell with conspiracy, false statements, mail fraud, wire fraud, and tax evasion. It is alleged that Treadwell, as a director and/or chief executive officer of several organizations including P.I. Properties, Inc.,
entered into a conspiracy with the other defendants, in which the object was "for the defendants to unjustly and illegally enrich themselves and the other businesses which they directed and controlled, by using P.I. Properties to acquire Clifton Terrace [Apartments] and thereafter to misappropriate, misapply, divert and steal monies and assets from Clifton Terrace and the other housing projects which P.I. Properties owned or managed and to hide, conceal and cover up such misappropriation, misapplication, diversion and theft.
Counts 18-22 and 24 of the indictment charge defendant Treadwell with mail fraud, 18 U.S.C. § 1341. According to the government's theory of the case, defendants used money misappropriated from Clifton Terrace to purchase property in the District of Columbia. The mail fraud counts arise from the mailing of real estate deeds by the Recorder of Deeds for the various parcels of property. The government further alleges that defendants then improved the properties with the proceeds of later misappropriations from Clifton Terrace. See, e.g., Overt Acts 20, 38.
Defendant Treadwell argues that the mailing occurred after defendants had acquired dominion over any misappropriated funds. Since the alleged scheme had been achieved prior to the mailings they were not sufficiently related to the fraud to fall within the scope of the statute.
To establish a violation of 18 U.S.C. § 1341 the government must prove that the mails were used "'for the purpose of executing' the fraudulent scheme, and not merely 'as a result of' such scheme." United States v. Alston, 197 U.S.App.D.C. 276, 283, 609 F.2d 531, 538 (1979), cert. denied, 445 U.S. 918, 100 S. Ct. 1281, 63 L. Ed. 2d 603 (1980), quoting United States v. Maze, 414 U.S. 395, 405, 94 S. Ct. 645, 651, 38 L. Ed. 2d 603 (1974). In Alston defendants' scheme involved the falsification of credit records of individuals who had difficulty obtaining credit for the purpose of enabling them to purchase automobiles. The mail fraud allegations stemmed from the mailing of installment sales contracts to the lender by the automobile dealer. The court concluded:
We believe that the scheme to defraud reached fruition before the mailing of each conditional sales contract. The dealer's mailing of the contract, which contained the terms of payment and an assignment of the contract to the lending institution, neither furthered the objective of the scheme (i.e., obtaining a loan for the applicant) nor served to conceal the fraudulent representations. Although the signing of the installment contract may have been a contemplated step toward obtaining possession of the car, we believe the subsequent mailing was immaterial to the fraud perpetrated upon the lender by the borrower.
197 U.S.App.D.C. at 284, 609 F.2d at 539 (footnotes omitted).
The Court finds that the continuing investment of misappropriated funds into the properties does not link the mailings to the alleged fraudulent scheme. Each instance in which money was invested in the properties was merely further use of proceeds obtained "'as a result of' such scheme." United States v. Alston, supra p. 82. The mailings did not further the objectives of the alleged scheme, did not conceal the alleged fraudulent representations, and did not ensure the success of the alleged scheme.
Moreover, the government's characterization of the scheme as encompassing the objective of obtaining money for the purpose of building a business empire gives the scheme greater breadth than the statute countenances. In United States v. Maze, defendant repeatedly used someone else's credit card, and each time it was used the establishments to which the credit card was presented transmitted the invoices by mail to the appropriate bank. According to the government's assertions here this should have been viewed as an ongoing scheme to fraudulently obtain goods and services. Nevertheless, the Court held that since the mailings did not serve "the purpose of executing such scheme", no mail fraud had occurred. 414 U.S. at 405, 94 S. Ct. at 651. Likewise, the use of the proceeds to purchase property, and the mailing of the real estate deeds, were not sufficiently connected to the alleged scheme to defraud to constitute a violation of the statute.
Finally, the government cites United States v. Buckley, 689 F.2d 893 (9th Cir. 1982), cert. denied, 460 U.S. 1086, 103 S. Ct. 1778, 76 L. Ed. 2d 349 (1983), as authority to uphold the sufficiency of the indictment. In the case the court held that it was unknown whether the government had enough evidence to substantiate its allegations. Id. at 900. In this case, however, even construing the facts in a light most favorable to the government, it is the government's ...