Pending before this Court are the following motions filed by Defendant Kenneth Mitan: Motion to Quash the Indictment, Rule 12 Motion to Dismiss the Indictment, Amended Motion to Dismiss the Indictment, Motion to Quash the Superseding Indictment, and Motion to Dismiss the Superseding Indictment (Doc. Nos. 97, 109, 141, 197, 198). Defendant Bruce Atherton also filed a Motion to Dismiss the Indictment (Doc. No. 155). In addition, Defendant Frank Mitan joined Defendants' Motions to Dismiss. For the foregoing reasons, the Motions will be DENIED.
I. Factual and Procedural Background
Defendants Kenneth Mitan, Frank Mitan, Bruce Atherton, and Charro Pankratz were indicted on December 18, 2008 (Doc. No. 1). Defendants Kenneth Mitan and Frank Mitan were indicted on five counts: conspiracy to commit wire and mail fraud (Count I), two counts of mail fraud (Counts II - III), and two counts of wire fraud (Counts IV - V). Defendant Kenneth Mitan was also indicted on a sixth count: use of a false name in a fraud scheme (Count VI). Defendants Atherton and Pankratz were indicted on the conspiracy count (Count I). Defendants are accused of defrauding small businesses. Their scheme involved approaching a small business under false pretenses, negotiating to buy the business, not paying the full amount of money due under the contract at closing, taking control of the business, diverting its cash and accounts receivable for personal use, and undermining the fiscal health of the acquired business. (Grand Jury Tr. 5, Dec. 18, 2008; Superseding Indictment 3-4). The Indictment describes four companies allegedly defrauded by two or more Defendants: Benny's Cheese Company (naming Kenneth and Frank Mitan), Engel Corporation (naming Kenneth and Frank Mitan), Houseware Distributors, Inc. ("HDI") (naming Kenneth and Frank Mitan and Bruce Atherton), and Pruscino Brothers Produce (naming all four Defendants). (Superseding Indictment 4-9).
The Indictment specifically describes the fraudulent scheme as follows: Between at least in or about June 2005 through and including in or about February 2008, defendants KENNETH MITAN, a/k/a "John Adams," a/k/a "John Miller," a/k/a "John Thompson," a/k/a "John Hill," FRANK MITAN, a/k/a "Frank Mytan," a/k/a "Frank Miller," BRUCE ATHERTON, and CHARRO PANKRATZ victimized small-business owners in the Eastern District of Pennsylvania and elsewhere. Using several corporate entities, the defendants identified small businesses for sale, used false and fraudulent pretenses to obtain control of those businesses, and continued the fraud long enough to drain the businesses' assets for both the defendants' personal enrichment and continuing promotion of the fraudulent scheme. (Id. 1-2 ¶ 1). The conspiracy is described as the four Defendants and others conspiring "to knowingly devise a scheme to defraud, and for obtaining money and property by means of false and fraudulent pretenses, representations, and promises, and to use the United States mails, commercial interstate carriers, and interstate wires to further the scheme to defraud." (Id. 2-3 ¶ 7). The Indictment further describes the manner and means as to each business allegedly defrauded and twenty-seven overt acts in furtherance of the conspiracy. (Id. 3-14).
Defendants Frank Mitan, Atherton, and Pankratz were released on bail after hearings by Magistrate Judge Caracappa on December 24, 2008 (Doc. Nos. 12, 15, 18). Kennth Mitan was detained pre-trial per Order by Magistrate Judge Strawbridge issued January 7, 2009 (Doc. No. 24). On January 8, 2009, Kenneth Mitan's attorney filed a Motion to Withdraw (Doc. No. 25), and Mitan filed a Motion to be Appointed Pro Se on January 13, 2009 (Doc. No. 29). At a hearing held January 30, 2009, this Court approved Kenneth Mitan to proceed pro se (Doc. No. 58). Mitan has continued to proceed pro se since that time; however this Court appointed standby counsel for Mitan on March 6, 2009 (Doc. No. 89).
Since that time, Mitan has filed numerous pre-trial motions, including a Motion and Request for Release (Doc. Nos. 51, 66), which this Court denied on March 6, 2009 (Doc. No. 91). Mitan subsequently appealed that decision to the Third Circuit (Doc. No. 120), following this court's denial of his Motion for Reconsideration (Doc. No. 115). The Third Circuit denied Mitan's Motion for Release on June 2, 2009 (Doc. No. 202).
On March 16, 2009, Mitan filed a Motion to Quash Indictment (Doc. No. 97), which alleges that United States Postal Inspector George Clark committed perjury in his grand jury testimony. The Government responded on March 30, 2009 (Doc. No. 108). Additionally on March 31, 2009, Mitan filed a Rule 12 Motion to Dismiss the Indictment (Doc. No. 109).
The Government issued a Superseding Indictment on April 23, 2009 (Doc. No. 133), which added one additional count (Count VII) against Kenneth Mitan for a false statement before the court related to an affidavit that Mitan filed as Exhibit C to his Motion for Release on Conditions (Doc. No. 118).
Mitan filed an Amended Rule 12 Motion to Dismiss on April 29, 2009 (Doc. No. 141).
Defendant Bruce Atherton filed a Motion to Dismiss the Indictment the same day (Doc. No. 155). Defendant Frank Mitan joined Defendants' Motions to Dismiss by oral request at a hearing held May 7, 2009.The Government responded to Defendants' Motions to Dismiss on May 15, 2009 (Doc. No. 192).On May 28, 2009, Defendant Kenneth Mitan filed a Reply to the Government's Response and joined Bruce Atherton's Motion to Dismiss (Doc. No. 196). On that same date, Kenneth Mitan filed a Motion to Quash the Superseding Indictment, specifically related to Count VII (Doc. No. 197).Kenneth Mitan also filed a Motion to Dismiss the Superseding Indictment for a violation of Rule 6(e)(1) (Doc. No. 198). The Government responded to Mitan's Reply and Mitan's new Motion to Quash and Motion to Dismiss on June 4, 2009 (Doc. No. 203).
Because the Superseding Indictment charges only one additional count against Kenneth Mitan and does not change the language of the original six counts, Kenneth Mitan's Motions filed prior to the issuance of the Superseding Indictment remain relevant. In addition, because the language in the two Indictments is identical for Counts One through Six, this Court will refer to the Indictment and the Superseding Indictment interchangeably when discussing these counts.
A. Kenneth Mitan's Motion to Quash the Indictment
In his March 16, 2009 Motion to Quash and corresponding Reply brief, Defendant Mitan alleges that the Indictment should be quashed because of perjured grand jury testimony on December 18, 2008 by Inspector Clark. Mitan's allegations of perjury fall into three general categories. First, Mitan claims that Clark's testimony that each of the sellers of the four companies named in the Indictment were not paid the full amount of money due on the closing date is false.Second, Mitan claims that Clark's testimony that Mitan and his co-Defendants transferred company funds and accounts receivable to shell accounts is false and deliberately misleading. Third, Mitan argues that Clark's testimony that Mitan and his co-Defendants withdrew money from the newly-acquired companies for their own and their family's personal use is false and deliberately misleading. In addition, Mitan alleges perjury related to Clark's specific testimony about each of the four companies.Mitan asserts that Clark's perjury was pervasive and systemic, in direct contradiction to the documents and interviews gathered by the Government, and further that the Government relied on hearsay evidence in order to conduct the alleged perjury. Mitan argues that the perjury substantially influenced the jury such that he was prejudiced by this misconduct.
The Government argues that Mitan has not met the high standard necessary to quash an indictment. First, the Government argues that even if all of the allegedly perjurous testimony challenged by Mitan is struck, the remaining grand jury testimony is sufficient to support probable cause of the crimes charged. The remaining testimony includes discussion of Mitan's negotiations with the target companies using a false name and under false pretenses, the use of private interstate mail facilities and interstate wire communications to facilitate control over the target companies, and evidence showing the active participation of each co-Defendant in the alleged conspiracy. Second, the Government argues that Clark's testimony was not false and was supported by documents and interviews gathered in the Government's investigation. Further, the Government argues that Mitan's allegations of perjury and responses thereto relate to his ultimate legal theories in defending his case at trial and are not appropriate in a motion to quash. The Government did not respond to each specific allegation of perjury made by Mitan but offered to do so at the Court's request.
B. Kenneth Mitan's Motion to Quash the Superseding Indictment
In his May 28, 2009 Motion to Quash the Superseding Indictment, Mitan again alleges perjury by Inspector Clark in the grand jury testimony on April 23, 2009, which concerned the allegations in Count VII of the Superseding Indictment. Mitan specifically argues that Clark gave perjurous testimony when he stated that the lawyer of an individual identified in the Superseding Indictment as M.T.had called various FBI agents and claimed that M.T.'s signature had been forged.
The Government responded that Clark's testimony was truthful and supported by evidence. Furthermore, the Government claims that substantial unchallenged grand jury testimony exists, despite the allegedly perjured statement, to establish probable cause of the crime charged in Count VII.
C. Kenneth Mitan's Initial and Amended Motions to Dismiss the Indictment
In his first Motion to Dismiss filed March 31, 2009, Defendant Mitan argues under Rule 12(b)(3)(B) that the facts alleged in the Indictment are insufficient to support the charged crimes.He argues that each of the target companies sold its business to Mitan and his co-Defendants for good consideration, so any business activities conducted subsequent to the sale were authorized by the target company's seller and were not illegal. Further, he argues that the specific allegations of interstate mailings and wires-involving post-acquisition transactions of the acquired companies-do not relate to the alleged fraud charged-involving the acquisition of the target companies-and therefore can not support wire and mail fraud charges. Finally, Mitan claims that the Government has no evidence to support many of its specific allegations that Mitan fraudulently purchased multiple small business and diverted their assets.
In his Amended Motion to Dismiss filed April 29, 2009, Mitan makes further allegations challenging the sufficiency of the Government's evidence to support the mail and wire fraud and use of a fake name charges. In addition, Mitan challenges Count Seven in the Superseding Indictment, which alleges perjury by Mitan in an affidavit he filed with this Court. Mitan claims the perjury charge is selective prosecution but seeks addition time to file a supporting brief. Finally, Mitan claims that the entire Indictment must be dismissed because it does not meet various pleading requirements to sustain the crimes charged.
The Government responds to both Motions by claiming that Mitan's arguments are largely improper in the context of a Motion to Dismiss, since they either challenge the sufficiency of the Government's evidence or litigate the ultimate issue of Mitan's guilt or innocence. In addition, the Government argues that the Indictment specifically alleges that the instances of mail and wire fraud in Counts Two through Five were made for the purpose of executing the fraudulent scheme, regardless of when they occurred, and therefore articulate cognizable mail and wire fraud claims.
In his Reply brief, Mitan reiterates many of the previous arguments he made in his initial and amended Motions to Dismiss about the mail and wire fraud charges. In addition, he challenges the conspiracy count on multiple grounds: failure to plead with specificity, failure to plead materiality, duplicitous pleading, and additional arguments that are repetitive of arguments he made as to Counts Two through Five.
D. Kenneth Mitan's Motion to Dismiss the Superseding Indictment
In his Motion to Dismiss the Superseding Indictment, filed May 28, 2009, Mitan argues that the grand jury testimony used to return the Superseding Indictment violates Federal Rule of Criminal Procedure Rule 6(e)(1), which requires that all proceedings before the grand jury be recorded. Mitan argues that there is a three-minute gap in the grand jury testimony of April 23, 2009, in violation of the Rule.
The Government responded that this argument is wholly frivolous since all grand jury proceedings were recorded other than grand jury deliberations or voting. In addition, even if the proceedings had not been recorded, the Government claims that this is not a sufficient basis for dismissal based on the language of Rule 6(e)(1). Finally, the Government states that there is no support in the record that the Government misstated the grand jury's question to the witness.
E. Bruce Atherton's Motion to Dismiss the Indictment
Bruce Atherton asserts that the Indictment should be dismissed on two grounds. First, Atherton claims that the Indictment improperly alleges a single conspiracy when it should have charged multiple conspiracies. Atherton argues that because he was only alleged to be involved in two of the four businesses fraudulently purchased and because he was only alleged to be involved in the business's operations post-purchase and not in the purchase itself, he was not engaged in the common goal of the conspiracy. Instead, Atherton claims he participated in a limited "spoke" activity and not in the "wheel" of the conspiracy. In addition, Atherton argues that the Indictment does not allege he had knowledge of the other spokes of the conspiracy, including the fraudulent purchases of the two companies with which he was not involved.
Second, Atherton claims that the Indictment does not allege a criminal act because it does not adequately allege the fraudulent conduct engaged in by Defendants. Further, Atherton again argues that the Indictment only alleges his involvement in the second part of the scheme, the diversion of company assets, and not in the first part of the scheme, the fraudulent purchase of the companies. It follows, Atherton claims, that he did not have sufficient knowledge of the fraud and overall scheme.
The Government responds to Atherton's first argument by articulating the three-factor test used by the Third Circuit to distinguish between single and multiple conspiracies. The Government argues that the Indictment satisfies each of the three factors in order to charge a single conspiracy because it alleges a common purpose, nearly identical modus operandi as to each of the fraudulent purchases, and substantive involvement by each of the named co-conspirators. In answer to Atherton's second argument, the Government claims that Count One clearly alleges his direct involvement in two of the four fraudulent purchases and six overt acts he committed to further the overall conspiracy such that the Indictment adequately alleges his criminal conduct.
A. Motion to Quash the Indictment
The standard to quash an indictment is extremely high. "[A]s a general matter, a district court may not dismiss an indictment for errors in grand jury proceedings unless such errors prejudiced the defendants." Bank of Nova Scotia v. United States, 487 U.S. 250, 254 (1988). Further, the district court must assess such claims using the "harmless error" standard. Id. at 255-56. In Bank of Nova Scotia, the Supreme Court identified two scenarios where dismissal of an indictment is appropriate: (1) where "structural protections of the grand jury have been so compromised as to render the proceedings fundamentally unfair, allowing the presumption of prejudice" or (2) where "'the violation substantially influenced the grand jury's decision to indict,' or . . . there is 'grave doubt' that the decision to indict was free from the substantial influence of such violations," which can establish the necessary prejudice. Id. at 256-57 (quoting United States v. Mechanik, 475 U.S. 66, 78 (1986)).
To exemplify the first category, the Court described cases where there had been racial or gender discrimination in grand jury selection, Bank of Nova Scotia, 487 U.S. at 257 (citing Vasquez v. Hillery, 474 U.S. 254, 260-264 (1986); Ballard v. United States, 329 U.S. 187 (1946)), but courts have rejected applying this standard outside of the discrimination context. See United States v. Soberon, 929 F.2d 935, 950 (3d Cir. 1991) (rejecting that allegedly perjured grand jury testimony falls into the "structural protections" category such that prejudice does not have to be shown).
The second category, which both parties agree is the applicable analysis here, requires a showing that the violation prejudiced the grand jury. Violations that may warrant dismissal of an indictment are those violations of the "'few, clear rules which were carefully drafted and approved by this Court and by Congress to ensure the integrity of the grand jury's functions,'" including standards for prosecutorial behavior set forth in the U.S. Code. United States v. Williams, 504 U.S. 36, 46, n.6 (1992) (quoting Mechanik, 475 U.S. at 74 (O'Connor, J., concurring)).False declarations before the grand jury are criminalized by 18 U.S.C. § 1623.Therefore, perjury and prosecutorial misconduct, if prejudicial, would be grounds for quashing an indictment.
B. Motion to Dismiss the Indictment
A motion to dismiss under Federal Rule of Criminal Procedure 12(b)(3)(B) tests the sufficiency of the indictment. In analyzing a motion to dismiss, the Court must accept as true the facts alleged in the indictment and determine if those facts constitute a violation of the law under which the defendant is charged. United States v. Stewart, 955 F.Supp. 385, 386 (E.D. Pa. 1997). If the facts alleged do not constitute a violation of federal law, the charges should be dismissed. Id. "An indictment is generally deemed sufficient if it: (1) contains the elements of the offense intended to be charged, (2) sufficiently apprises the defendant of what he must be prepared to meet, and (3) allows the defendant to show with accuracy to what extent he may plead a former acquittal or conviction in the event of a subsequent prosecution." United States v. Vitillo, 490 F.3d 314, 321 (3d Cir. 2007) (quoting United States v. Rankin, 870 F.2d 109, 112 (3d Cir. 1989)). The indictment need contain no greater specificity than the statutory language "so long as there is sufficient factual orientation to permit the defendant to prepare his defense and to invoke double jeopardy in the event of a subsequent prosecution." Rankin, 870 F.2d at 112 (citations omitted). "[A]n indictment is sufficient if it adequately informs the defendant of the charges against him." United States v. Turley, 891 F.2d 57, 59 (3d Cir. 1989).
In evaluating the sufficiency of the indictment, the Court is limited to the four corners of the indictment itself, not outside evidence. Vitillo, 490 F.3d at 321.The sole function of a motion to dismiss is to test the sufficiency of the allegations in the indictment; it is not a device to test the sufficiency of the government's evidence. United States v. DeLaurentis, 230 F.3d 659, 660 (3d Cir. 2000).
A motion to dismiss a conspiracy indictment is evaluated under the same standards noted above. See Rankin, 870 F.2d at 113 (quoting United States v. Scanzello, 832 F.2d 18, 22 (3d Cir. 1987); United States v. Bailey, 444 U.S. 394, 414 (1980)).A single conspiracy count may allege a conspiracy to commit several crimes or constitute a conspiracy with multiple objectives.
United States v. Reyes, 930 F.2d 310, 312 (3d Cir. 1991) (quoting Braverman v. United States, 317 U.S. 49, 54 (1942)). The Third Circuit employs a three-step inquiry to determine whether a series of events ...