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United States v. Smukler

United States District Court, E.D. Pennsylvania

July 13, 2018

UNITED STATES
v.
KENNETH SMUKLER

          MEMORANDUM

          DuBois, J.

         I. INTRODUCTION

         On October 24, 2017, a federal grand jury in the Eastern District of Pennsylvania named defendant Kenneth Smukler and co-defendant Donald “D.A.” Jones in a six count Indictment. On March 20, 2018, the Government filed a Superseding Indictment. The Superseding Indictment charges Smukler with: participation in a conspiracy in violation of 18 U.S.C. § 371 (Count I); causing unlawful campaign contributions in violation of 52 U.S.C. §§ 30109(d)(1)(A)(i), 30116(f), and 18 U.S.C. § 2 (Counts II & VII); causing false campaign reports in violation of 52 U.S.C. §§§ 30104(a)(1), 30104(b)(5)(A), 30109(d)(1)(A)(i), and of 18 U.S.C. § 2 (Counts III, IV & X); causing false statements in violation of 18 U.S.C. §§ 2 and 1001(a)(1) (Count V & VI); making contributions in the name of another in violation of 52 U.S.C. §§ 30109(d)(1), 30116(f), 30122, and 18 U.S.C. § 2 (Counts VIII & IX); obstruction of a pending agency proceeding in violation of 18 U.S.C. §§ 2 and 1505.

         Presently before the Court is Defendant Kenneth Smukler's Motion to Dismiss the Indictment for Vindictive Prosecution (Document No. 45, filed February 2, 2018). The Court conducted a hearing on the Motion on March 13, 2018. At that hearing, counsel for defendant requested leave to file a supplemental memorandum in support of defendant's Motion to Dismiss the Indictment for Vindictive Prosecution in light of the Superseding Indictment, which the Court granted. For the reasons that follow, defendant's Motion to Dismiss the Indictment for Vindictive Prosecution is denied. The Court also denies defendant's request for discovery on the issue of vindictiveness.

         II. BACKGROUND

         The Superseding Indictment charges defendant with campaign finance violations in connection with two congressional campaigns: (1) the 2012 congressional primary campaign of United States Representative Robert Brady (“Brady”) and (2) the 2014 congressional primary campaign of Marjorie Margolies. The charges are summarized below.

         A. Charges Related to Brady for Congress Campaign

         On April 24, 2012, Candidate A-later identified as Robert Brady-was to face Jimmie Moore for the Democratic Party's nomination for Member of the United States House of Representatives. Superseding Indictment Count I ¶ 1. The Superseding Indictment charges that defendant-a political consultant and close associate of Brady-and his co-conspirators arranged for and facilitated payments from the Brady campaign to the Moore campaign to induce Moore to drop out of the 2012 Democratic primary. Id. ¶ 12.

         Specifically, the Government states that Brady and Moore reached an agreement whereby the Brady campaign would pay Moore $90, 000 to cover campaign debts, using intermediaries and, in exchange, Moore would drop out of the primary election race. Indictment ¶ 16(a), (e). On February 29, 2012, Moore withdrew from the primary race. Id. ¶ 16(c). Moore and a member of his campaign staff, Carolyn Cavaness, [1] then prepared a list of debts owed by the Jimmie Moore for Congress campaign, which included nearly $90, 000 owed to Moore himself and $35, 000 owed to Cavaness. Id. ¶16(d). Thereafter, defendant agreed with Moore that the Brady campaign would make three payments totaling $90, 000, and it did so. Id. ¶¶ 16(e), (f). The first two payments, the Government alleges, were to be disguised as payments for the purchase of a poll and the third payment was to be disguised as a payment for consulting services. Id. ¶ 16(f). Defendant allegedly instructed Cavaness to form a shell company-CavaSense and Associates, LLC-to facilitate these payments. Id. ¶¶16(f), (g).

         On June 11, 2012, the Brady for Congress campaign sent a check in the amount of $40, 000 to defendant's entity, Voter Link Data Services (“VLDS”). Indictment ¶ 16(1), (m). Two days later, VLDS sent a check in the amount of $40, 000 to Cavaness with the memo line, “Poll.” Id. ¶ 16(m). The Brady for Congress campaign sent a second payment of $25, 000 to VLDS on July 10, 2012. Id. ¶ 16(r). Then, on July 17, 2012, VLDS sent a check in the amount of $25, 000 to Cavaness bearing the memo line, “Poll.” Id. ¶ 16(s). The Government charges that the parties agreed to justify the first two payments as payments for a poll which analyzed the primary election matchup between Moore and Brady. Id. ¶¶ 16 (h), (i). But by the time the poll was purportedly purchased by Brady, Moore had already dropped out of the race, the poll was more than a year old, and the Brady campaign already had access to a poll nearly identical to the one allegedly purchased from the Moore campaign. Id. ¶ 16(i). The final payment of $25, 000 was sent by the Brady for Congress campaign to D.A. Jones' entity-D.Jones and Associates-on August 23, 2012. Id. 16(x). On August 30, 2012, D. Jones and Associates sent a check to CavaSense in the amount of $25, 000 that purported to be payment for consulting services. Id. ¶16(y). The Government charges that neither Cavaness nor CavaSense performed any consulting work for the Brady or Jones campaigns. Id.

         At Moore's direction, Cavaness used $21, 000 of the money provided through VLDS and D.Jones & Associates to pay vendors owed by the Moore for Congress campaign. Id. 16(bb). Cavaness also paid $19, 500 directly to Moore by checks bearing the memo line “Reimbursement.” Id. 16(cc). The Superseding Indictment states that Cavaness and Moore kept the remainder of the money provided by Brady through VLDS and D.Jones & Associates in Cavaness's personal bank account. Id. 16(dd).

         The Superseding Indictment further charges that the conspirators caused the Brady campaign to submit campaign finance reports to the Federal Election Commission (“FEC”) which falsely described the payments as for consulting services and polling. Indictment ¶¶¶ 16(o), (v)(z). Finally, the Superseding Indictment states that the conspirators caused the Moore campaign to submit reports to the FEC falsely omitting the payments from the Brady for Congress campaign, VLDS, or D. Jones & Associates. Id. at ¶¶¶¶ 16(ee), (ff), (gg), (hh).

         B. Charges Related to Marjorie 2014 Campaign

         Candidate “C”-later identified as Marjorie Margolies-ran in the 2014 Democratic primary election for Pennsylvania's Thirteenth Congressional District. Superseding Indictment Count VI, ¶3. During that time, defendant owned and operated two political consulting companies, Black and Blue Media Inc. (“BBM”) and InfoVoter Technologies (“InfoVoter”). Id. ¶9a. BBM and InfoVoter received approximately $210, 750 from Marjorie 2014-Margolies' campaign committee-for expenses associated with the primary election.[2] Id.

         The Federal Election Campaign Act (“FECA”) prohibits candidates from spending campaign contributions raised for the general election on expenses in connection with the primary election. Superseding Indictment Count I ¶ 9(f). A candidate who does not prevail in the primary election is required to refund any contributions raised for the general election. Id.

         According to the Superseding Indictment, the Margolies campaign ran out of funds that it could lawfully spend on the primary election. Superseding Indictment, Count V ¶ 9(c). As a result, in or about April and May of 2014, defendant directed Jennifer May, the campaign treasurer, to continue spending funds, thus causing the campaign to impermissibly spend funds raised for the general election on primary election expenses. Id. On April 29, 2018, defendant informed May that he would wire $78, 750 to the campaign from BBM. Id. ¶ 9(d). On May 2, 2014, defendant wired $78, 750 from his personal brokerage account to BBM. Id. ¶ 9(e), (f). He then transferred those funds from BBM to the campaign on May 5, 2014. Id. ¶ 9(d). Defendant's personal account was subsequently replenished in the amount of $75, 000, on May 7, 2014, by a close associate. Id. ¶ 9(g). As a consequence, the Government charges that Marjorie 2014 submitted a report to the FEC on July 15, 2014, which falsely described the payment from BBM as a “refund, ” when the payment was actually an unlawful campaign contribution. Id. ¶ 9(h).

         Margolies subsequently lost the primary election. Following that loss, the campaign lacked sufficient funds to refund general election contributions as required under FECA, because it had impermissibly spent funds designated for the general election on primary election expenses. Id. ¶ 9(i). Defendant told May that the general election contributions had been “escrowed” in an InfoVoter account and that InfoVoter would issue the refunds to the campaign. Id. ¶ 9(j). In reality, the Government charges that defendant used unlawful campaign contributions-which he funneled through InfoVoter and BBM-to replenish the campaign account. Id. ¶¶ 9(k)-(o). Specifically, a close associate of defendant wired $150, 000 to defendant's personal brokerage account on July 11, 2014. Id. ¶ 9(k). Two days later, defendant wired $40, 000 to BBM and $110, 000 to InfoVoter. Id. ¶¶ 9(1), (m). On July 14, 2018, BBM and InfoVoter wired the money received from defendant to a bank account associated with the Margolies campaign. Id. ¶¶ 9(n), (o). The Government alleges that, as a result of these payments, defendant caused the Marjorie 2014 campaign to file FEC reports falsely stating that the payments were “refunds” of general election expenses, when they were unlawful campaign contributions. Id. ¶¶ 9(p), (q).

         In April of 2014, Margolies' primary challenger, Daylin Leach, filed a complaint with the FEC in which he alleged that her campaign had unlawfully used general election funds in connection with primary election expenses. The Margolies campaign retained Perkins Coie attorney Karl Sandstrom in connection with the FEC inquiry. The Government alleges that defendant misrepresented the nature of the “refunds” allegedly issued from BBM and InfoVoter-which were in fact, unlawful campaign contributions-to Sandstrom. Superseding Indictment Count V, ¶ 9(r). As a consequence, the Government charges that defendant caused Sandstrom to falsely report to the FEC that they payments made by BBM and InfoVoter to the campaign were refunds of general election expenses. Id. The FEC subsequently dismissed the complaint filed by Daylin Leach. Id.

         In June 2015, the FEC determined that InfoVoter had refunded to the Margolies campaign approximately $18, 000 more than the campaign had paid it initially. Id. ¶ 9(t). As a consequence, the Margolies campaign was required to repay InfoVoter the excess $18, 000. Id. After the campaign repaid InfoVoter the $18, 000, the campaign account had a negative balance. Id. ¶ 9(v). To replenish the campaign account, the Government alleges that defendant sent a check for $25, 000 from BBM to Margolies' personal bank account and instructed Margolies to transfer $23, 750 from her personal account to the campaign account. Id. The Government charges that defendant caused Marjorie 2014 to file a report with the FEC which falsely stated that the $23, 750 payment from Margolies' personal account to the campaign was a loan from the candidate herself, when in fact, the payment was an unlawful campaign contribution. Id. ¶ 9(w).[3]

         III. ...


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