The opinion of the court was delivered by: JOHN GARRETT PENN
Defendants Automated Data Management, Inc. ("ADM"), David M. Dale ("Dale"), Michelle Ashton ("Ashton"), Terrence Sweeney ("Sweeney"), and Martin Segal ("Segal") are charged in a ten count Indictment with conspiracy,
subscribing to and aiding and assisting in the preparation and presentation of false and fraudulent tax returns,
attempted tax evasion,
concealing facts by trick, scheme and artifice,
and aiding and abetting.
In short, the Indictment alleges that defendants participated in a scheme whereby they created and used overseas companies under their control for tax evasion purposes. This case presently comes before the Court on a number of motions filed by defendants: (1) Defendants' Motion to Dismiss Count One; (2) Defendants' Motion to Dismiss Count Two; (3) Defendants' Motion to Dismiss Count Five; and (4) Defendants' Motion to Dismiss Counts Six through Ten. Each of these motions will be addressed in turn.
II. Motion to Dismiss Count One
Count One charges all defendants with conspiracy to defraud the United States and to commit substantive offenses against the United States. It charges a single conspiracy to defraud the United States by impeding, impairing, obstructing and defeating the functions of the Internal Revenue Service in the assessment and collection of income taxes, and to commit the following substantive offenses against the United States: (1) tax evasion in violation of 26 U.S.C. § 7201; (2) subscribing to a false tax return and aiding and abetting the preparation of a false tax return in violation of 26 U.S.C. §§ 7206(1), (2); and (3) making false statements to and concealing material facts by trick, scheme and device from the Internal Revenue Service, the Small Business Administration and the Department of Defense in violation of 18 U.S.C. § 1001. The conspiracy statute provides, "If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, . . . each shall be fined . . . or imprisoned . . . or both." 18 U.S.C. § 371 (emphasis added).
Defendants move to dismiss as duplicitous the conspiracy count, since it charges the defendants with conspiracy under both the "specific offenses" clause and under the "defraud" clause of § 371. Defendants argue that a count which alleges violation of both clauses of the conspiracy statute violates Rule 8(a) of the Federal Rules of Criminal Procedure because it charges two separate offenses. Defendants further argue that Count One subjects them to the risk of conviction by less than a unanimous jury, and fails to adequately inform them of the real charges. Alternatively, defendants move to strike the defraud language from the indictment as surplusage.
Duplicity is the joining of two or more offenses in a single count. See Fed.R.Crim.P. 8(a). This circuit has already decided that a violation of both prongs of § 371 may be alleged in a single count of an indictment without charging more than one offense. See May v. United States, 84 App. D.C. 233, 175 F.2d 994 (D.C. Cir.) (affirming conviction of a United States Congressman who had been charged in a single count with conspiracy to defraud the United States and to commit specified substantive offenses), cert. denied, 338 U.S. 830, 70 S. Ct. 58, 94 L. Ed. 505 (1949). In May, the court reasoned that "neither a multiplicity of objects nor a multiplicity of means converts a single conspiracy into more than one offense." Id. at 1002 (footnote omitted). This rule is consistent with Supreme Court precedent: "The allegation in a single count of a conspiracy to commit several crimes is not duplicitous, for 'The conspiracy is the crime, and that is one, however diverse its objects.'" Braverman v. United States, 317 U.S. 49, 54, 63 S. Ct. 99, 102, 87 L. Ed. 23 (1942) (quoting Frohwerk v. United States, 249 U.S. 204, 210, 39 S. Ct. 249, 252, 63 L. Ed. 561 (1919)). Thus, "since the law of conspiracy allows for schemes with more than one object, the fact that a count may allege conspiracy both to commit offenses against the United States and to defraud the United States does not necessarily make that count duplicitous." United States v. Recognition Equipment, Inc., 711 F. Supp. 1, 7 (D.D.C. 1989) (emphasis in original) (citing United States v. Treadwell, 245 App. D.C. 257, 760 F.2d 327, 335-36 (D.C. Cir. 1985), cert. denied, 474 U.S. 1064, 106 S. Ct. 814, 88 L. Ed. 2d 788 (1986)).
Recent decisions from other jurisdictions have also considered whether a single count charging a conspiracy to defraud the United States and to commit substantive offenses violates the rule against duplicity; they have followed the May reasoning and held likewise. See, e.g., United States v. Smith, 891 F.2d 703, 711-13 (9th Cir. 1989) (indictment charging conspiracy to defraud United States and to commit substantive offenses in single count was not unconstitutionally duplicitous; two clauses of section 371 establish alternate means of commission rather than two distinct conspiracy offenses); United States v. Williams, 705 F.2d 603, 623-24 (2d Cir.), cert. denied, 464 U.S. 1007, 104 S. Ct. 524, 78 L. Ed. 2d 708, 104 S. Ct. 525 (1983) (rejecting appellants' duplicity claim where indictment charged in a single count conspiracy to defraud the United States and to commit substantive offenses); United States v. Berlin, 707 F. Supp. 832, 836 (E.D.Va. 1989) (rejecting duplicity argument, relying on May). See also United States v. Treadwell, 760 F.2d at 336 ("[A] single conspiracy may contemplate . . . the violation of one or more federal statutes in addition to defrauding the United States."). Thus, despite its age, May remains good law and retains current vitality.
Defendants nevertheless invite this Court to reconsider the May holding in light of the statutory interpretation of § 371 in United States v. Minarik, 875 F.2d 1186 (6th Cir. 1989). Defendants also rely on United States v. Haga, 821 F.2d 1036, 1039 (5th Cir. 1987) and United States v. Thompson, 814 F.2d 1472, 1477 (10th Cir.), cert. denied, 484 U.S. 830, 108 S. Ct. 101, 98 L. Ed. 2d 61 (1987) in urging a re-evaluation of May.
At the outset, it is worth mentioning that none of the cases cited by defendants dealt with the duplicity argument presently before this Court. In Minarik, the defendant was not charged under both prongs of the conspiracy statute. The one-count indictment charged the defendant with willfully conspiring "to defraud the United States by impeding, impairing, obstructing and defeating the lawful functions of the Department of the Treasury." Minarik, 875 F.2d at 1188. The defendant was convicted although at trial the government proved only the existence of a conspiracy to violate a specific statute, 26 U.S.C. § 7206(4). The Sixth Circuit affirmed the district court's order granting the defendant's motion for judgment notwithstanding the verdict, since the defendant had not been charged with the offense prong of § 371, on the ground that the proof was at variance with the indictment.
The court reasoned that "the 'offense' and 'defraud' clauses as applied to the facts of this case are mutually exclusive, and the facts proved constitute only a conspiracy under the offense clause . . . ." Id. at 1187. Throughout the period from the return of the indictment through the trial, the government's theory of the case had evolved; the court found these theories to be "significantly dissimilar" resulting in the presence of confusion. Id. at 1189. The court further felt that the divergence between the defendants' duty under the specific offense clause and that assumed by their indictment under the defraud clause of § 371 generated unnecessary and avoidable confusion. Id. at 1195. "Such confusion in a criminal prosecution is not permissible when an indictment for conspiracy to commit the offense . . . would have provided all the clarity that was missing." Id. Consequently, the Court held that conspiracies to commit specific offenses should be prosecuted exclusively under the offense clause of § 371 rather than under the defraud clause in order to avoid unnecessary confusion. Id. at 1194. The court, however, appears to limit this holding to situations where a Congressional statute closely defines those duties of a citizen which are "technical and difficult to discern". Id. at 1196.
United States v. Haga similarly involved a situation where the court found there was a fatal variance between the indictment and the proof of the conspiracy; the prosecution charged under the offense clause of § 371, but the proof at trial supported a conviction on the defraud clause. Although no duplicity argument was advanced or addressed by the court, it stated, "Count I must have charged a conspiracy either to 'commit any offense' or to 'defraud the United States'; it cannot have charged both." United States v. Haga, 821 F.2d at 1043 (emphasis in original).
Finally, in United States v. Thompson, the court was presented with a double jeopardy claim by a defendant who had first been charged with conspiracy to commit mail fraud and later charged with conspiracy to defraud the United States. The court held that the crimes were distinct since each requires proof of an element which the other does not, and permitted the subsequent prosecution. Id. at 1477. Again, the court was not presented with a duplicity argument.
Defendants contend that Minarik, Haga and Thompson hold that the defraud and offense clauses of § 371 constitute two separate offenses such that an indictment which charges, in a single count, a conspiracy to violate both prongs of the statute cannot stand. Additionally, defendants argue that Minarik interprets § 371 to require the government to indict either for a conspiracy to defraud the United States or for a conspiracy to commit specific offenses, for any given course of alleged criminal conduct. According to defendants, Minarik further holds that where there is a specific criminal statute covering the course of action complained of, the government is obliged to charge a conspiracy to commit that offense. Conversely, under Minarik the government would be allowed to charge a conspiracy to defraud the United States only in circumstances where there is no federal criminal statute which covers the complained of activity. Relying on Minarik, defendants thus argue that the government's theory of this case only supports the allegation that defendants conspired to commit offenses against the United States. As gleaned from the indictment and as described in the government's response to defendants' motion for a bill of particulars, defendants assert:
That both of the conspiracy charges in count 1 are based on the same course of conduct conducted in order to accomplish the same goal, that is, the government is arguing in this case that what occurred was these defendants caused money to be transferred overseas to foreign corporations related to their corporation in the United States; that they made personal use of some of those funds; and then the purpose of these transactions was to defraud the government of revenues properly due from those transactions.
Tr. at 147.
Indeed, the government has categorically stated that its theory of the case is that the defendants created and used overseas companies under their control for three means of tax evasion. Government's Opposition to Defendants' Motion for a Bill of Particulars at 1. Defendants argue that there are substantive statutes which amply cover the alleged wrongful conduct; i.e., tax evasion, filing of false returns and making false statements to government agencies. Defendants thus apply their analysis of Minarik to conclude that, under these circumstances, the government's conspiracy allegations must be grounded on the offense prong of the conspiracy statute. Moreover, defendants argue that the government was wrong to charge a conspiracy to defraud since this charge only reaches conspiracies to engage in certain fraudulent conduct not otherwise prohibited by federal law. Finally, defendants assert that the charging language in the Indictment regarding defrauding the United States is confusing and exposes the defendants to the unconstitutional risk of a conviction by a less than unanimous jury.
In the Court's view, Minarik, Haga, and Thompson do not require dismissal of the conspiracy count on grounds of duplicity. The Court reaches this conclusion for several reasons. First, defendants erroneously read Minarik to state that § 371 creates two separate offenses. In fact, Minarik affirmatively cites precedent, including May, for the proposition "that § 371 creates one crime that may be committed in one of two alternate ways." Minarik, 875 F.2d at 1193 (emphasis in original). The Minarik court found this conclusion to be "entirely consistent with the rule requiring courts to give penal statutes a narrow interpretation." Id. Moreover, to the extent that Haga and Thompson imply that § 371 creates two separate conspiracy offenses, they are rejected. See United States v. Smith, 891 F.2d at 712.
Additionally, Minarik does not broadly decide that § 371 creates two mutually exclusive ways of proceeding with a conspiracy charge, as defendants contend. Rather Minarik must be limited to its facts, especially since the court specifically held that "the 'offense' and 'defraud' clauses as applied to the facts of this case are mutually exclusive." Id. at 1187. Minarik dealt with a situation where the factual allegations in the indictment and the evidence adduced at trial only showed that defendants conspired to commit a specific offense; it clearly does not consider the possibility that any given course of alleged criminal conduct might encompass a conspiracy both to commit offenses specifically defined elsewhere in the federal criminal code and to defraud the United States. As such, it does not support defendants' contention that an indictment may not properly charge in a single count a conspiracy to commit offenses and to defraud.
Finally, even if the Court were to accept defendants' interpretation of Minarik, this interpretation does little to advance their duplicity claim. In short, defendants argue that Minarik requires the government to charge a conspiracy under the "offense" clause where there is a specific federal crime covering the alleged wrongful conduct, and permits the government to charge a conspiracy under the "defraud" clause only where there is no federal crime that covers the alleged wrongful conduct. In defendants' view, since the alleged wrongful conduct in this case is amply proscribed by federal criminal statutes, the government should not be permitted to charge them under both prongs of § 371, or even under the defraud clause standing alone. This ...