U.S. v. Di Fonzo

• Decision Date: 15 October 1979
• Docket Number: No. 79-1142,79-1142
• Citation: 603 F.2d 1260
• Parties: Fed. Sec. L. Rep. P 96,957 UNITED STATES of America, Plaintiff-Appellee, v. Luigi M. DI FONZO, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1260

603 F.2d 1260

Fed. Sec. L. Rep. P 96,957

UNITED STATES of America, Plaintiff-Appellee, v. Luigi M. DI FONZO, Defendant-Appellant.

No. 79-1142.

United States Court of Appeals Seventh Circuit.

Argued June 13, 1979.

Decided Aug. 2, 1979.

Rehearing and Rehearing In Banc Denied Oct. 15, 1979.

James J. Cutrone, Chicago, Ill., for defendant-appellant.

Thomas P. Sullivan, U. S. Atty., Julian Solotorovsky, Asst. U. S. Atty., Chicago, Ill., for plaintiff-appellee.

Before SWYGERT and CUMMINGS, Circuit Judges, and CAMPBELL, Senior District Judge. ¹

SWYGERT, Circuit Judge.

The principal question raised by this appeal concerns the scope of the Security Exchange Commission's ("SEC") "jurisdiction" pursuant to 18 U.S.C. § 1001, a statute which punishes false statements made "in any matter within the jurisdiction of any department or agency of the United States." We hold that the false statements submitted by defendant to the SEC were within that agency's jurisdiction and affirm his conviction.

I

Defendant Luigi M. DiFonzo operated a business which sold commodity options to the public. From January 1973 to May 1973 this business operated under the name "North American Commodity Options Exchange, Inc." From May 1973 to January 1974 the business was named "North American Investments Company, Inc." Defendant bought and sold commodity futures through these two corporations, utilizing the services of several brokerage houses.

In early 1973 the Chicago Regional Office of the SEC began to investigate defendant and his investment company. During this investigation defendant submitted to the SEC documents issued by Siegal Trading Company, Inc. ("Siegal"), a brokerage house with which defendant had an account. The SEC investigation eventually discovered that defendant had altered figures in these documents in order to make his investment company appear more solvent.

On February 1, 1978 defendant was charged in a three count indictment with presenting documents to the SEC which contained false statements in violation of 18 U.S.C. § 1001. ² Count I charged that defendant presented the SEC with a document which purported to confirm defendant's purchase (through Siegal) of thirty-two silver futures commodity contracts when in fact, Siegal had made no such purchase for defendant's account. Counts II and III alleged that defendant submitted documents to the SEC which overstated the balance of two accounts defendant had with Siegal.

Numerous pretrial motions were filed by defendant including a motion to dismiss the indictment for failure to state an offense under 18 U.S.C. § 1001 on the ground that the indictment on its face alleged facts showing that the SEC did not have jurisdiction over defendant's activities and that, therefore, the alleged false statements were neither made in nor material to a matter within the jurisdiction of the SEC. The district court denied this motion.

On December 21, 1978 defendant entered a plea of guilty to Counts II and III of the indictment. The Government dismissed Count I of the indictment and the district court entered judgment. Sentence was entered January 30, 1979. On February 9, 1979 defendant filed this appeal.

II

The Government argues that we need not reach the question whether defendant's false statements were within the jurisdiction of the SEC pursuant to 18 U.S.C. § 1001, because the defendant, by pleading guilty to the charge brought by the Government under the statute, waived his right to contest the issue on appeal. Defendant responds that if, as he contends, the false statements did not pertain to a matter within the jurisdiction of the SEC, the indictment fails to state an offense and therefore the general rule that a guilty plea bars subsequent attacks on a conviction does not apply.

It is well established that a valid guilty plea waives objections based on most prior defects in the Government's prosecution of a defendant. See Coleman v. Burnett, 155 U.S.App.D.C. 302, 309, 477 F.2d 1187, 1194 (1973), and cases cited therein. It is equally well established that if a defendant contends that his indictment was so defective that it failed to charge an offense, his plea of guilty does not bar his subsequent challenge to the indictment on appeal. Id. 155 U.S.App.D.C. at 309 n. 20, 477 F.2d at 1194, n. 20; Melvin v. United States, 316 F.2d 647, 648 (7th Cir. 1963). The scope of such a challenge to the sufficiency of the indictment, however, is not unrestricted. The defendant is not permitted to transcend the four-corners of the indictment in order to demonstrate its insufficiency. Melvin, supra, 316 F.2d at 648. And a guilty plea is an admission of all the factual allegations contained in the indictment. Coleman, supra, 155 U.S.App.D.C. at 308, 477 F.2d at 1193; United States v. Singletary, 441 F.2d 333 (5th Cir. 1971). As we said in United States v. Friedman, 416 F.2d 947, 949 (7th Cir. 1969), "In the absence of any factual determination below construing the indictment, defendant's voluntary and knowing plea of guilty is an admission to all the stated allegations of the indictment . . . ." In essence, a defendant who has pleaded guilty must show that the words and allegations of the indictment on its face failed to state an offense in order to challenge successfully his conviction on appeal.

The Government correctly observes that Counts II and III of the indictment against defendant each contain an allegation that defendant presented a false statement to the SEC "in a matter within the jurisdiction of the S.E.C." Given the fact that a guilty plea constitutes an admission to the allegations of the indictment, this jurisdictional allegation normally would preclude any appellate inquiry concerning the SEC's jurisdiction vis-a-vis defendant's false statements. The indictment against defendant, however, also contains preliminary factual allegations describing defendant's business operations. Defendant argues that these facts preclude the conclusion of Counts II and III that defendant's false statements were in a matter within the jurisdiction of the SEC. In effect, defendant contends that the indictment contradicts itself on its face: Counts II and III assert that SEC jurisdiction was present, while the preliminary factual allegations demonstrate that defendant's business activities could not be within the legitimate purview of the SEC. See Reply Brief for Defendant-Appellant, pp. 4-5, n. 3.

We agree with defendant's position that appellate review of his conviction is available on these grounds. If defendant can demonstrate that the preliminary factual allegations of the indictment preclude the indictment's later conclusion that his false statements pertained to a matter within the jurisdiction of the SEC, he will have shown that the indictment contradicts itself, and, more importantly, that the preliminary factual allegations of the indictment negate one of the elements of the offense charged. He will have shown that the indictment "fails to state an offense," which is an infirmity in the Government's prosecution which survives a defendant's guilty plea.

Although we agree with defendant's position on the preliminary issue of whether his appeal survives his plea of guilty, we disagree with his contention that the preliminary factual allegations of the indictment, on their face, preclude a conclusion that the false statements he presented to the SEC related to a matter within the SEC's jurisdiction. The Supreme Court said in Bryson v. United States, 396 U.S. 64, 90 S.Ct. 355, 24 L.Ed.2d 264 (1969):

Because there is a valid legislative interest in protecting the integrity of official inquiries, See United States v. Bramblett, 348 U.S. 503, 75 S.Ct. 504, 99 L.Ed. 594 (1955); United States v. Gilliland, 312 U.S. 86, 93, 61 S.Ct. 518, 85 L.Ed. 598 (1941), we think the term "jurisdiction" should not be given a narrow or technical meaning for purposes of § 1001, Ogden v. United States, 303 F.2d 724, 742-43 (C.A.9th Cir. 1962); United States v. Adler, 380 F.2d 917, 921-922 (C.A.2d Cir. 1967). A statutory basis for an agency's request for information provides jurisdiction enough to punish fraudulent statements under § 1001.

Id. at 70-71, 90 S.Ct. at 359. The Government contends that the statutory jurisdiction of the SEC for purposes of the jurisdictional requirement of section 1001 "goes beyond the Commission's statutory authority to regulate, and includes their authority to investigate to determine whether securities laws are being violated." ³ Brief of Plaintiff-Appellee, p. 10. We need not decide whether statutory authority to investigate, without more, is sufficient to satisfy the jurisdictional requirement of section 1001. ⁴ In this case there was a sufficient nexus between the subject matter of the SEC investigation which led to defendant's submission of false documents to the SEC and the SEC's regulatory authority to satisfy the jurisdiction requirement of section 1001.

Because of his guilty plea, defendant must demonstrate that the description of his business activities found in the preliminary factual allegations of the indictment, given the applicable law, negates the indictment's conclusory allegation that the false statements made by defendant (and the SEC investigation which prompted them) were within the SEC's jurisdiction. See, supra, pp. 1262-1264. The preliminary factual allegations of the indictment state that defendant "operated a business which sold commodity options to the public . . . (and) caused (his business) to buy and sell commodity futures by use of various commodity brokerage firms." This description of defendant's activities does not absolutely remove them from the legitimate purview of the SEC. Thus, the SEC investigation into these activities had a sufficient jurisdictional base to satisfy the requirement of section 1001.

At the time the SEC began its investigation in 1973, there was general agreement that commodity futures contracts were not...