U.S. Chalmers

Decision Date22 February 2007
Docket NumberNo. S5 05 CR. 59(DC).,S5 05 CR. 59(DC).
Citation474 F.Supp.2d 555
PartiesUNITED STATES of America v. David. B. CHALMERS, Jr., Oscar S. Wyatt, Jr., John Irving, Ludmil Dionissiev, Catalina Del Socorro Miguel Fuentes, a/k/a "Cathy Miguel," Mohammed Saidji, Bayoil (USA), Inc., Bayoil Supply & Trading Limited, Nafta Petroleum Company Limited, Mednafta Trading Company Limited, and Sarenco, S.A., Defendants.
CourtU.S. District Court — Southern District of New York

Michael J. Garcia, Esq., United States Attorney for the Southern District of New York by Edward O'Callaghan, Esq., Stephen Miller, Esq., Michael Farbiarz, Esq., Assistant United States Attorneys, New York, NY, for the United States.

Jenner & Block LLP by Andrew Weissmann, Esq., Stephen L. Ascher, Esq., Harry Sandick, Esq., Stillman & Friedman, P.C., by Paul Schectman, Esq., Glen Kopp, Esq., New York, NY, for Defendant David B. Chalmers, Jr.

Welsh & Recker, P.C. by Catherine M. Recker, Esq., Amy Carver, Esq., Philadelphia, PA, for Defendants Bayou' Companies.

Dechert LLP by David M. Howard, Esq., Michael J. Gilbert, Esq., Tara L. Cooney, Esq., Philadelphia, PA, for Defendant Ludmil Dionissiev.

Canales & Simonson by J.A. Canales, Esq., Corpus Christi, TX, The Parker Law Firm by Carl A. Parker, Esq., Port Arthur, TX, Ropes & Gray LLP by Samuel J. Buffone, Esq., Stacy D. Belf, Esq., Washington, DC, Gerald L. Shargel, Esq., New York, NY, for Defendant Oscar S. Wyatt, Jr.


CHIN, District Judge.

In this case, the Government alleges that defendants paid secret and illegal surcharges to the Government of Iraq in exchange for the right to receive allocations of Iraqi oil under the United Nations Office of the Iraq Programme, Oil-for-Food (the "Program"). Defendants are charged with wire fraud, engaging in prohibited financial transactions with Iraq, conspiracy, and violations of the International Emergency Economic Powers Act ("IEPA"). Defendants move to dismiss certain charges and for other relief.


The Court assumes familiarity with the facts of this case, as set forth in its Opinion of January 25, 2006, United States v. Chalmers, 410 F.Supp.2d 278 (S.D.N.Y.2006).

Before the Court are two sets of pretrial motions — one filed by defendants David B. Chalmers, Jr., Ludmil Dionissiev, Bayoil (USA), Inc., and Bayoil Supply & Trading Limited (together, the "Bayoil Defendants"), and the other filed by defendant Oscar S. Wyatt, Jr. These motions were filed on May 5, 2006, seeking relief with respect to the third superseding indictment. Shortly thereafter, on May 15, 2006, a grand jury returned a fourth superseding indictment. The Government filed its opposition to the pre-trial motions on August 25, 2006.

On September 18, 2006, several weeks before defendants filed their reply briefs on October 4, 2006, a fifth superseding indictment, S5 05 Cr. 59(DC) ("Indictment"), was returned.1 Counts One through Four of the Indictment charge defendants with: (1) conspiracy to commit wire fraud and to engage in prohibited financial transactions with Iraq in violation of 18 U.S.C. §§ 1343 & 2332d; (2) wire fraud in violation of 18 U.S.C. §§ 1343, 1349 & 2; (3) engaging in prohibited financial transactions with Iraq in violation of 18 U.S.C. §§ 2332d & 2; and (4) violating IEEPA, 50 U.S.C. § 1701, et seq. Count Five, previously charged against defendant Tongsun Park,2 now charges Wyatt alone with an additional violation of IEEPA. Also before the Court is Wyatt's motion to dismiss Count Five or for alternative relief.

A. Pre-trial Motions to Dismiss
1. Legal Standard

An indictment is sufficient "if it, first, contains the elements of the offense charged and fairly informs a defendant of the charge against which he must defend, and, second, enables him to plead an acquittal or conviction in bar of future prosecutions for the same offense." United States v. Solomony an, 451 F.Supp.2d 626, 640 (S.D.N.Y.2006) (quoting Hamling v. United States, 418 U.S. 87, 117, 94 S.Ct. 2887, 41 L.Ed.2d 590 (1974)). As the Second Circuit has explained, "an indictment need do little more than to track the language of the statute charged and state the time and place (in approximate terms) of the alleged crime." United States v. Stayroulakis, 952 F.2d 686, 693 (2d Cir.1992) (citations omitted). Furthermore, when deciding a motion to dismiss, a court must accept all factual allegations in the indictment as true. United States v. Clarke, No. 05 Cr. 17, 2006 WL 3615111, at *1 (S.D.N.Y. Dec.07, 2006) (citations omitted). A court should not look beyond the face of the indictment and draw inferences as to proof to be adduced at trial, for "the sufficiency of the evidence is not appropriately addressed on a pretrial motion to dismiss an indictment." United States v. Alfonso, 143 F.3d 772, 776-77 (2d Cir.1998).

2. Count Two (Wire Fraud)

The wire fraud statute provides, in pertinent part:

[w]hoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire ... communication in interstate ... commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall [be guilty of a crime].

18 U.S.C. § 1343: The Second Circuit has held that the essential elements of wire' fraud are: (1) a scheme to defraud; (2) money or property as the object of the scheme; and (3) use of the wires to further the scheme. Fountain v. United States, 357 F.3d 250, 255 (2d Cir.2004); see 18 U.S.C. § 1343.

The Indictment contains more than adequate allegations with respect to the first and third elements of wire fraud. The Indictment sets out in considerable detail a scheme to defraud — the "Surcharge Scheme" — pursuant to which defendants agreed to pay and did pay millions of dollars of secret illegal surcharges to the Government of Iraq in exchange for oil allocations that they otherwise would have been prohibited by law from receiving. (Indictment ¶¶ 7, 14-23). The Indictment describes the roles of each defendant in the scheme, the steps taken in furtherance of the scheme, and the approximate dates and locations of those events. (Id ¶¶ 8-17, 19-23, 27). The Indictment also charges defendants with using wire transmissions to further the Surcharge Scheme. (Id ¶ 27).

It is the second element of wire fraud — that money or property was the object of the scheme to defraud — that forms the basis for defendants' motions. The Indictment alleges that the Surcharge Scheme resulted in the diversion of funds from the Oil-for-Food Program Bank Account ("OFFP Bank Account"). (Id ¶¶ 20, 23). Specifically, it alleges that "[b]y participating in this Surcharge Scheme and bypassing the Oil-for-Food Program, [defendants and others] caused funds to be diverted from the Oil-for-Food Program Bank Account that otherwise would have been available to purchase humanitarian goods under the Oil-for-Food Program." (Id.). The victims of the Surcharge Scheme, as identified by the Government, were the Iraqi People and the Oil-for-Food Program itself. Chalmers, 410 F.Supp.2d at 287. The thrust of defendants' motions is that the Indictment fails to allege that these two entities had a valid property interest in the funds allegedly diverted from the OFFP Bank Account.

As a preliminary matter, I first turn to whether, as the Bayoil Defendants maintain, wire fraud requires a victim. (See Bayoil Defendants Letter dated Dec. 15, 2006 to Court at 1-2). I hold that wire fraud does indeed require a victim or intended victim. The wire fraud statute is limited in scope to the protection of money or property rights. Fountain, 357 F.3d at 255 (citing McNally v. United States, 483 U.S. 350, 360, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987)); see, e.g., Cleveland v. United States, 531 U.S. 12, 26, 121 S.Ct. 365, 148 L.Ed.2d 221 (2000) (holding that State was not victimized by scheme to defraud because it was not deprived of any property interest and stating that "any benefit which the Government derives from the [mail fraud] statute must be limited to the Government's interests as property holder.") (quoting McNally, 483 U.S. at 359 n. 8, 107 S.Ct. 2875) (emphasis in original). As the Supreme Court has held, an element of wire fraud is that the object of the scheme to defraud be money or property "in the victim's hands." Pasquantino v. United States, 544 U.S. 349, 355, 125 S.Ct. 1766, 161 L.Ed.2d 619 (2005) (quoting Cleveland, 531 U.S. at 26, 121 S.Ct. 365). It is difficult to imagine how the Government could prove a violation of a statute intended to "punish[ ] those who had fraudulently deprived others of their property," United States v. Schwartz, 924 F.2d 410, 416 (2d Cir.1991) (citing McNally, 483 U.S. at 358-61, 107 S.Ct. 2875), without showing who those "others" were.

In any event, the Government has identified the two victims of the Surcharge Scheme and I next address defendants' arguments that the Indictment fails to allege that the Surcharge Scheme deprived these purported victims of a legitimate property interest.

a. Defendants' Contention That No Monies Were Diverted

At the outset, the Bayoil Defendants claim that the very structure of the Oil-for-Food Program precludes the Government's theory that the Surcharge Scheme deprived the Program or the Iraqi People of any property. They explain the structure of the Program as follows: Under the Program Iraqi oil was sold at the Official Selling Price ("O.S.P.") — a price fixed by a committee made up of member states of the United Nations ("U.N.") Security Council upon the recommendation of a rotating group of U.N. oil overseers. (Indictment ¶ 5). The Iraqi Government determined the quantity of oil to be sold, and the resulting funds were deposited into the OFFP Bank Account. (Id ¶¶ 2, 6). The Iraqi Government alone selected the...

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