United States District Court, W.D. Pennsylvania
Barry Fischer U.S. District Judge.
a white collar criminal case arising from an alleged fraud on
the United States Department of Transportation's
Disadvantaged Business Enterprise Program (“DBE
Program”) by Century Steel Erectors (“CSE”)
and WMCC, Inc., and their respective principals. (Docket No.
1). In this case, the Government has charged one of the
owners of CSE, Defendant Donald Taylor, with fourteen
separate criminal offenses. (Docket No. 1). The Government
generally maintains that Defendant and CSE used WMCC, Inc., a
certified disadvantaged business entity, (“DBE”),
as a “front” to obtain 13 federally funded
highway construction contracts requiring DBE status, and that
CSE performed the work on the jobs while it was represented
to agencies and contractors that WMCC would be performing the
work. (Id.). The Government contends that WMCC did
not perform a “commercially useful function” on
the jobs as the DBE regulations require and that CSE
personnel did the actual work, taking great efforts to
conceal from general contractors and government entities that
CSE and its personnel were doing the work. (Id.).
According to the Government, WMCC's principal, Watson
Maloy,  was paid a relatively nominal
“fixed-fee” for permitting use of WMCC's name
on each of these subcontracts. (Id.).
issue in this Memorandum Opinion are Defendant's Motion
to Dismiss the Indictment and his Motion to Suppress
Evidence, both of which are opposed by the
Government. (Docket No. 33). The Motions have been
fully briefed. (See Docket Nos. 33, 35, 40, 44, 46,
51, 52). The Court held a motion hearing on December 12,
2016, at which time the parties presented a joint stipulation
of facts, (Docket No. 48), and a stipulated exhibit, (Docket
No. 49-2), and the attorneys presented oral argument as to
the pending motions, (Docket No. 53). After careful
consideration of the parties' arguments and for the
following reasons, Defendant's Motions to Dismiss and to
Suppress Evidence  are DENIED.
RELEVANT PROCEDURAL HISTORY
grand jury returned its Indictment in this case on November
19, 2015. (Docket No. 1). Defendant is charged with fourteen
separate offenses: (Count 1) one count of conspiracy to
defraud the United States in violation of 18 U.S.C. §
371; (Counts 2-3) two counts of wire fraud in violation of 18
U.S.C. § 1343; (Counts 4-11) eight counts of mail fraud
in violation of 18 U.S.C. § 1341; (Count 12) one count
of money laundering conspiracy in violation of 18 U.S.C.
§ 1956(h); and (Counts 13-14) two counts of engaging in
monetary transactions derived from unlawful activity in
violation of 18 U.S.C. §§ 1957(a) and 2.
(Id.). Given the complexity of the matter, the Court
granted Defendant several extensions of time to file pretrial
motions. (Docket Nos. 13, 16, 18, 28).
filed his Omnibus Pretrial Motion and supporting Brief on
July 27, 2016. (Docket Nos. 33, 35). After receiving
extensions of time from the Court, the Government filed its
response on October 17, 2016. (Docket No. 40). The Court
granted Defendant leave of court to submit a reply brief and
he did so on November 7, 2016. (Docket No. 44). The
Government then filed its sur-reply on November 15, 2016.
(Docket No. 46). The Court held a motion hearing on December
12, 2016. (Docket Nos. 49, 53). At the hearing, the parties
requested the opportunity to file supplemental briefs on
matters raised at the hearing, and such request was granted
by the Court. (Docket No. 49). Thereafter, the Government
filed its supplemental brief on December 13, 2016, (Docket
No. 51), with Defendant filing his response to same on
December 19, 2016, (Docket No. 52). The official transcript
of the motion hearing was produced and filed with the Court
on January 6, 2017. (Docket No. 53). In light of these
submissions, the pending motions are now fully briefed and
ripe for disposition.
MOTION TO DISMISS
Court first turns to Defendant's Motion to Dismiss the
Indictment wherein he seeks to dismiss the charges for a host
of different reasons, all of which are opposed by the
Government. (Docket Nos. 33, 35, 44, 52). Briefly, Defendant
argues that Count One must be dismissed because he has been
purportedly mischarged under the “defraud clause”
of 18 U.S.C. § 371, in that the allegations do not
support a charge that he defrauded the United States.
(Id.). He contends that the DBE program is
administered through state and county entities, such that he
could not have defrauded the United States, which he believes
merely provides funding to the states to administer the DBE
program. (Id.). Defendant also argues that the
Indictment must be dismissed because the underlying federal
regulations, 49 C.F.R. § 26.55(c), that support the
counts against him are allegedly void for vagueness as
applied to the facts at issue. (Id.). More
specifically, he challenges the definition of
“commercially useful function” set forth in the
regulations and also contends that Congress improperly
delegated its duties to the Executive branch in promulgating
the regulations at issue. (Id.). The Government
counters that the charge at Count One is supported by the
allegations in the Indictment which make clear that the
charge is for defrauding the United States' DBE program
rather than the state and county entities. (Docket Nos. 40,
46, 51). The Government adds that the challenged regulations
are neither unconstitutionally vague nor were they
promulgated in violation of the principles of separation of
Allegations in the Indictment 
Indictment alleges the following. Defendant was the president
and owner of CSE. (Docket No. 1 at ¶ 1). He had
authority and oversight over all projects being performed by
CSE. (Id.). CSE was a non-DBE steel erection and
precast concrete erection subcontractor based in Dravosburg,
Pa. (Id.). CSE was owned by Defendant and operated
by him and Darlaine Taylor, vice president. (Id.).
T.L. was the controller for the company, managing the
finances of CSE and reporting directly to Defendant, starting
in July of 2011 . (Id. at ¶ 2). Watson Maloy
was the president and sole owner of WMCC, a certified DBE.
(Id. at ¶ 3).
Indictment details the federal government's establishment
of the DBE Program through the DOT and its sub-agency, the
Federal Highway Administration, (“FHWA”), and
outlines the associated statutes and regulations governing
same. (Id. at ¶ 4). The FHWA provides billions
of dollars annually in federal funding to state departments
of transportation for the construction and maintenance of the
federal highway system. (Id.). The DBE Program is
structured to increase the participation of DBEs in these
federally funded highway construction projects, setting a
goal of ten-percent participation. (Id. at
¶¶ 4-5). Pertinent here, the Pennsylvania
Department of Transportation (“PennDOT”) and the
Pennsylvania Turnpike Commission (“PTC”) receive
federal funds from FHWA for federally funded highway projects
and, as a result of same, are required to establish goals and
objectives in administering the DBE Program. (Id.).
State and local authorities are also delegated the
responsibility to administer the program by, among other
things, certifying entities as DBEs; tracking the usage of
DBEs on federally funded highway projects through the award
of credits to general contractors on specific projects; and
reporting compliance with the participation goals to the
federal authorities. (Id. at ¶¶ 4-15).
January 2012 and February 2014, “WMCC received 13
federally-funded subcontracts totaling approximately $2.34
million under PennDOT's and PTC's DBE program and
WMCC was paid a total of $1.89 million.” (Id.
at ¶ 12). These subcontracts were between WMCC and a
general contractor, and required WMCC to furnish and erect
steel and/or precast concrete on federally funded
Pennsylvania highway projects. (Id.). Under
PennDOT's program, the entire amount of WMCC's
subcontract with the general contractor, including the cost
of materials and labor, was counted toward the general
contractor's DBE goal because WMCC was certified as a DBE
and “ostensibly performed a commercially useful
function in connection with the subcontract.”
grand jury charges that Defendant and other persons known to
it, agreed to “defraud the United States by impeding,
impairing, obstructing, and defeating the lawful governmental
function of the USDOT in the implementation, execution and
administration of the DBE program.” (Id. at
¶ 13). The stated purpose of the conspiracy was for
Defendant and his co-conspirators to enrich themselves by
using WMCC as a “front” company to fraudulently
obtain the profits on DBE subcontracts slotted for legitimate
DBE's and to increase CSE profits by marketing CSE to
general contractors as a “one-stop shop” which
could not only provide the concrete or steel beams, but also
erect the beams and provide the general contractor with
valuable DBE credits. (Id. at ¶ 14).
manner and means of the conspiracy is extensively detailed in
¶ 15 of the Indictment. Among other things:
• the conspirators used WMCC as a front company, where
funds were passed to CSE in order to obtain the appearance of
DBE participation on subcontracts WMCC was awarded under the
programs which in reality were performed by CSE personnel;
• under Defendant's direction and authority, CSE
personnel found, negotiated, coordinated, performed, managed,
and supervised the subcontracts awarded to WMCC and paid WMCC
a fixed-fee for use of its name so that CSE could obtain the
• CSE estimators/project managers, found the jobs,
prepared bids, mailed, faxed and negotiated the actual
• CSE engineers, project managers and superintendents
drafted erection drawings, negotiated crane rentals, arranged
for transportation of materials to the job site, and
recruited union workers to perform WMCC's subcontract
• the conspirators fraudulently induced the award of DBE
subcontracts to WMCC and the payments to WMCC by
“creating the illusion” that WMCC was doing the
• the conspirators concealed the fact that CSE personnel
were doing all of this work through false representations by
Maloy to the Port Authority of Allegheny County that he was
doing the work, and by CSE personnel to the general
contractors as they would use WMCC letterhead on faxes and
mailings on documents pertaining to the subcontracts;
• CSE personnel also submitted “phony” time
sheets and payroll reports to PennDOT, PTC and the general
contractors stating that WMCC employees were doing erection
• CSE personnel “pretended” to be WMCC
personnel when attending construction progress meetings at
PennDOT or PTC field offices and when contacting general
contractors and government officials; • CSE personnel
used WMCC's email account to communicate with PennDOT,
PTC officials, general contractors and suppliers. They also
possessed WMCC business cards, t-shirts and hard hats. They
disguised vehicles used to transport tools and materials to
job sites by placing magnetic signs over CSE logos on the
• CSE personnel were directed to use Maloy's
signature stamp on various documents, such as endorsing
checks; signing union benefit documents and certifying
• CSE personnel established fax and phone lines at CSE
offices to receive WMCC faxes and phone calls.
(Id.). As a result of these maneuvers, the
conspirators caused general contractors to pay WMCC for DBE
subcontracts and were deceived into crediting expenditures
toward DBE participation goals although they were not
eligible for such credits because WMCC was not performing a
commercially useful function on the jobs. (Id. at
¶ 15.v). CSE also obtained profits from lucrative DBE
subcontracts that it was not entitled to receive as it was
not a DBE and thereby precluded legitimate DBE's from
obtaining such contracts. (Id. at ¶ 15.vi).
and Maloy allegedly conspired to engage in this scheme in
exchange for the payment of a “fixed fee” to
Maloy directly. (Id. at ¶ 16). CSE then caused
a series of checks to be issued to Maloy, as outlined in the
Indictment. (Id.). WMCC obtained at least 13
separate subcontracts for which it did not perform a
commercially useful function, including:
at ¶ 15.xii.).
is charged at Counts Two and Three with two counts of wire
fraud in violation of 18 U.S.C. § 1343 related to
subcontracts with J.F. Shea Construction, Inc. (Id.
at ¶ 18). He is alleged to have committed eight counts
of mail fraud in violation of 18 U.S.C. §1341 for
causing fraudulent documents to be sent in the mail on
projects for Golden Triangle Construction; Plum Contracting,
Inc.; Lane Construction; Guilsek Construction Co.; and Swank
Construction Co., at Counts Four through Eleven.
(Id. at ¶ 20). The remaining counts relate to
the financial aspects of the scheme, with Count Twelve
charging conspiracy to commit money laundering in violation
of 18 U.S.C. § 1956(h) and Counts Thirteen and Fourteen
alleging that Defendant engaged in monetary transactions
derived from unlawful activity in violation of 18 U.S.C.
§§ 1957(a) and 2. (Id. at ¶¶
to dismiss are governed by Rule 12 of the Federal Rules of
Criminal Procedure. Fed. R. Crim. P. 12. Specifically, Rule
12(b)(3)(B) provides that “at any time while the case
is pending, the court may hear a claim that the indictment or
information fails to . . . state an offense.” Fed. R.
Crim. P. 12(b)(3)(B). The requirements of the contents of an
indictment are set forth in Rule 7 of the Federal Rules of
Criminal Procedure. Fed. R. Crim. P. 7. Pursuant to
Rule 7(c)(1), an indictment must “be a plain, concise,
and definite written statement of the essential facts
constituting the offense charged” and “must give
the official or customary citation of the statute, rule,
regulation, or other provision of law that the defendant is
alleged to have violated.” Fed. R. Crim. P. 7(c)(1).
The purpose of the promulgation of Rule 7 was to abolish
detailed pleading requirements and the technicalities
previously required in criminal pleading. See
United States v. Huet, 665 F.3d 588, 594 (3d Cir.
2012) (citing United States v. Resendiz-Ponce, 549
U.S. 102, 110 (2007)); see also United States v.
Bergrin, 650 F.3d 257, 264 (3d Cir. 2011) (same
citation). “Although detailed allegations may have been
required under a common law pleading regime, they
‘surely are not contemplated by [the Federal
Rules].'” Huet, 665 F.3d at 594 (quoting
Resendiz-Ponce, 549 U.S. at 110).
the sufficiency of an indictment, the United States Court of
Appeals for the Third Circuit has held that:
[A]n indictment [is] sufficient so long as 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 (3d Cir.
2007) (internal quotation marks omitted). Moreover, ‘no
greater specificity than the statutory language is required
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.'
United States v. Rankin, 870 F.2d 109, 112 (3d Cir.
Bergrin, 650 F.3d at 264 (quoting United States
v. Kemp, 500 F.3d 257, 280 (3d Cir. 2007)).
“Generally, an indictment will satisfy these
requirements where it informs the defendant of the statute he
is charged with violating, lists the elements of a violation
under the statute, and specifies the time period during which
the violations occurred.” Huet, 665 F.3d at
595 (citing United States v. Urban, 404 F.3d
754, 771 (3d Cir. 2005)).
In determining whether an indictment validly states the
elements of the offense, we need not blindly accept a
recitation in general terms of the elements of the offense.
United States v. Panarella,277 F.3d 678, 685 (3d
Cir. 2002). “Federal Rule of Criminal Procedure
12(b)(3)(B) allows a district court to review the sufficiency
of the government's pleadings to ... ensur[e] that
legally deficient charges do not go to a jury.”
United States v. Bergrin,650 F.3d 257, 268 (3d Cir.
2011). Although the Government is not required to set forth
its entire case in the indictment, “if the specific
facts” that are alleged “fall beyond the scope of
the relevant criminal statute, as a matter of statutory
interpretation, ” the indictment fails to state an
offense. Panarella, 277 F.3d at 685; seeUnited States v. Schiff,602 F.3d 152, 162-66 (3d
Cir. 2010) (finding that indictment alleging “failure
to rectify misstatements of others” did not, as a
matter of statutory interpretation, state an offense under 18
U.S.C. § 78j(b) and SEC Rule 10b-5). However, the scope
of a district court's review at the Rule 12 stage is
limited. “[A] pretrial motion to dismiss an indictment
is not a permissible vehicle for addressing the sufficiency
of the government's evidence.” United States v.
DeLaurentis,230 F.3d 659, 660 (3d Cir. 2000) (citations
omitted). “The government is entitled to marshal and
present its evidence at trial, and have its sufficiency
tested by a motion for acquittal pursuant to Federal Rule of
Criminal Procedure 29.” Id. at 661. There is
no criminal corollary to the civil summary judgment
mechanism. Id. In evaluating a Rule 12 motion to
dismiss, a district court must accept as true the factual
allegations set forth in the indictment. United States v.
Sampson,371 U.S. 75, 78-79, 83 S.Ct. 173, 9 L.Ed.2d 136
(1962); United States v. Besmajian,910 F.2d 1153,
1154 (3d Cir. 1990). ...