The opinion of the court was delivered by: DALZELL
This case arises out of a Government investigation of a real estate developer, Thomas Spano, and the various ways he attempted to keep his business afloat through the real estate slump in the late 1980s to early 1990s. All of the other defendants in these cases have pled guilty to various offenses involving false statements to financial institutions and concealment of assets from the Resolution Trust Corporation ("RTC"). The Government has charged defendant Carl Seitz with violations of 18 U.S.C. §§ 2 and 1032, alleging that he concealed assets from the RTC and aided and abetted Spano's deceptions.
Seitz has moved for dismissal of the indictment on the ground that the conduct alleged is not a crime. For the reasons stated below, we will grant Seitz's motion and dismiss the indictment against him.
At all times relevant to this case, defendant Thomas Spano ("Spano"), was a real estate developer who owned T.V. Spano Development Co., and several affiliated construction companies such as: Jupiter Bay Construction Co. ("Jupiter Bay"), Concord II Associates, Inc. ("Jupiter Bay"), Mon Fran Investment Company ("Mon Fran"), First Lathrum Corp. ("First Lathrum"), First Falcon Corp. ("First Falcon"), and First 202 Corp. ("First 202"). On December 29, 1987, Bell Savings Bank ("Bell") approved a loan of $ 10,216,000 to Spano's Concord II Associates to develop a settlement in Kennett Township, Chester County, Pennsylvania, to be called Falcon's Lair. The loan was settled on February 28, 1988. Bell also approved a loan of $ 5,435,274 on September 6, 1989, to Spano's Jupiter Bay Development Co. to develop an area to be known as Park Place. Park Place was to consist of thirty-seven single-family townhouses in Upper Providence Township, Delaware County, Pennsylvania. The parties settled the loan on September 18, 1989. Indict. Count Six at PP 3-4.
The repayment terms of the Park Place and Falcon's Lair loans required Spano's companies to pay to Bell a portion of the proceeds from each sale of a home in the respective developments in return for a release of the lien that Bell held on that individual parcel. Id. at P 5. According to the indictment, the usual procedure was that at the settlement the buyer would deliver payment to "an abstract company settlement agent, or a buyer's attorney". Id. at P 6. That attorney or settlement agent "would then generate payments to parties entitled to them: a payoff check to Bell Savings Bank, a check to defendant THOMAS V. SPANO'S construction company representing the profit on the construction and sale of the home; and other necessary payments, such as attorney, notary, and title insurance fees, document preparation fees, and school and county taxes." Id. at P 6.
On December 15, 1989, the Office of Thrift Supervision of the United States Treasury Department "ordered Bell to cease all commercial real estate, and land acquisition and development loans." Id. at P 7. The Resolution Trust Corporation took over Bell's operations on March 19, 1991. Id. at P 8. At the time of the RTC takeover, Spano's Jupiter Bay Corp. was in default on the Park Place loan. Id.
The Government alleges that Spano undertook a number of fraudulent activities in relation to his outstanding loans with Bell, the RTC and other banks who lent money in connection with the Park Place and Falcon's Lair developments. For example, Count Five of the indictment charges that in October, 1990, Spano, his construction manager Ronald Hewes, and an Irene Wolfgang (who is not a defendant in this case), submitted a false settlement document to Bell in connection with Ms. Wolfgang's purchase of a townhouse in Park Place to cheat Bell out of a portion of its share of the proceeds.
Ms. Wolfgang agreed to buy Lot # 16 at Park Place in October of 1990, apparently for $ 265,000. Spano, Hewes, and Wolfgang worked together to convince Bell that Ms. Wolfgang only paid $ 239,900 for the lot. They convinced Bell to agree "to a reduced cash payoff from the sale of Lot # 16 from Jupiter Bay of $ 182,601 plus the assignment of a $ 25,000 note payable to defendant SPANO'S company, Jupiter Bay, from Irene Wolfgang." Indict. Count Five at P 4. The Government alleges that this judgment note was a fiction, id. at P 5, and that Spano convinced Hewes "to include a false sales price of $ 239,900 on the false settlement sheet" Spano sent to Bell. Id. at P 6. Hewes signed a second settlement sheet, which he sent to Wolfgang's mortgage company, that included a sales price of $ 265,000. Id. On January 17, 1997, Hewes pled guilty to this charge.
The Government claims that this deception was not unique, and that Spano routinely hid the proceeds of the sales of lots in Park Place and of Falcon's Lair from Bell and other banks, as well as later, from the RTC. See Indict. Count Six. Count Six charges that Spano instructed Ronald Hewes "and other SPANO employees attending the settlements not to deliver payoff checks to Bell Savings Bank or to the RTC, and to instead bring the payoff checks to  SPANO'S construction offices." Id. at P 12. Spano also instructed Carl Seitz not to notify Bell or the RTC of settlements which Seitz's company, Academy Abstract, serviced at Falcon's Lair and Park Place. Id. at P 13. Seitz, according to the indictment, "was the President of Academy Abstract Company, 705 Haverford Road, Bryn Mawr, Pennsylvania, an abstract company which performed real estate settlement services for the sale of homes constructed by  THOMAS V. SPANO'S construction companies at Brittany, and at other SPANO developments called "Park Place", and "Falcon's Lair". Id. at P 2.
Seitz's involvement does not end with this alleged omission, however, as the Government claims that on Spano's instruction, Seitz set up "escrow accounts at Meridian Bank, Reading, Pennsylvania, nominally for the benefit of Bell Savings Bank, into which  SPANO caused the deposit of a total of $ 876,000 in payoff proceeds from the sale of homes at Falcon's Lair and Park Place." Id. at P 14. Neither Spano nor Seitz informed Bell or the RTC of the existence of this escrow account or the deposits of the proceeds of sales of Falcon's Lair and Park Place lots into that escrow account. Id. at P 14. While Spano and his alleged henchmen engaged in this behavior, the indictment alleges that Spano was negotiating with the RTC for a discounted settlement of his debt on the Park Place and Falcon's Lair loans. Id. at P 15.
As part of its liquidation of Bell, the RTC sold the Falcon's Lair and Park Place loans to WAMCO V, a Texas limited partnership. Id. at P 17. On July 30, 1993, Spano settled these loans with WAMCO V for less than the amount he owed on them. Id. at P 18. Spano then instructed Seitz to return the money in the escrow account, which with interest amounted to $ 885,974.43, to Spano, which Seitz did. During August and September of 1993, Spano also received back over $ 300,000 in similarly hidden funds from accounts with which Seitz had no association. Id. at P 20.
The only other mention of Seitz in the indictment appears in Count Seven, which does not charge him with a crime.
As noted above, neither Spano nor Seitz notified the RTC or Bell Savings Bank of the closings they conducted or of the money held in the escrow account. The Government has charged Seitz with concealing assets from the RTC, corruptly impeding RTC functions, and corruptly endeavoring to place assets beyond the RTC's reach, all in violation of 18 U.S.C. § 1032. Indict. Count Six at P 10. The Government also charges Seitz with aiding and abetting in violation of 18 U.S.C. § 2. Id.
Seitz moves for dismissal of Count Six on the ground that the conduct charged in the indictment is not a violation of the law. The standard we apply on such a motion is whether the acts alleged in the indictment amount to a violation of the law. See United States v. Polychron, 841 F.2d 833, 834 (8th Cir.), cert. denied 488 U.S. 851, 102 L. Ed. 2d 107, 109 S. Ct. 135 (1988)("If the acts alleged in the indictment do not constitute a violation of law, the indictment is properly dismissed.").
Seitz argues persuasively that because he did not prevent discovery of the assets and he had no affirmative duty to reveal anything to the RTC or to Bell, he cannot, as a matter of law, be guilty of concealing money or information from them. Seitz also moves for dismissal of the aiding and abetting charges on the cognate grounds that he did not act in any way to aid Spano's concealment of the funds and did not have an affirmative duty to reveal any concealment to the RTC or Bell.
A. Alleged Violation of 18 U.S.C. § 1032
1. Can There be a Concealment
Without a Duty to Disclose?