United States v. Agee
| Decision Date | 09 July 2021 |
| Docket Number | No. 1:19-cr-00103-TWP-DLP-01,No. 1:19-cr-00103-TWP-DLP-04,No. 1:19-cr-00103-TWP-DLP-02,No. 1:19-cr-00103-TWP-DLP-05,No. 1:19-cr-00103-TWP-DLP-03,1:19-cr-00103-TWP-DLP-01,1:19-cr-00103-TWP-DLP-02,1:19-cr-00103-TWP-DLP-03,1:19-cr-00103-TWP-DLP-04,1:19-cr-00103-TWP-DLP-05 |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. KERRI AGEE, KELLY ISLEY, NICOLE SMITH, CHAD GRIFFIN, and MATTHEW SMITH, Defendants. |
| Court | U.S. District Court — Southern District of Indiana |
This matter is before the Court on a Motion to Strike Surplusage filed by Defendant Kerri Agee ("Ms. Agee") (Filing No. 135).1 Ms. Agee and co-Defendants Kelly Isley ("Ms. Isley"), Nicole Smith-Kelso ("Ms. Smith-Kelso"), Chad Griffin ("Mr. Griffin"), and Matthew Smith ("Mr. Smith") are set to be tried by a jury on July 26, 2021, on multiple counts of wire fraud affecting a financial institution and conspiracy to commit wire fraud affecting a financial institution. In her Motion, Ms. Agee asks the Court to strike surplusage from the Amended Indictment (Filing No. 107) pursuant to Federal Rule of Criminal Procedure 7(d). For the following reasons, the Motion to Strike Surplusage is granted in part and denied in part.
Federal Rule of Criminal Procedure 7(c)(1) states that an indictment "must be a plain, concise, and definite written statement of the essential facts constituting the offenses charged" against the defendant. "Allegations in an indictment that are not necessary to establish a violation of the statute in issue are mere surplusage and may be disregarded if the remaining allegations aresufficient to charge a crime." United States v. Peters, 435 F.3d 746, 752 (7th Cir. 2006) (internal citation and quotation marks omitted). "A part of the indictment unnecessary to and independent of the allegations of the offense proved may normally be treated as a useless averment that may be ignored." United States v. Miller, 471 U.S. 130, 136 (1985) (internal citation and quotation marks omitted). Surplusage may include "those allegations which are insufficient to state an offense" under the indictment's charges. United States v. Eckhardt, 843 F.2d 989, 997 (7th Cir. 1988).
"Upon the defendant's motion, the court may strike surplusage from the indictment or information." Fed. R. Crim. P. 7(d). "The court's decision on a Rule 7(d) motion turns on considerations of relevance and prejudice." United States v. O'Connor, 656 F.3d 630, 645 (7th Cir. 2011). "Surplusage should not be stricken unless it is clear that the allegations are not relevant to the charge and are inflammatory and prejudicial." Id. (quoting United States v. Peters, 435 F.3d 746, 753 (7th Cir. 2006)). United States v. Chaverra-Cardona, 667 F. Supp. 609, 611 (N.D. Ill. 1987). "If evidence of the allegation is admissible and relevant to the charge, then regardless of how prejudicial the language is, it may not be stricken." United States v. Scarpa, 913 F.2d 993, 1013 (2d Cir. 1990).
Ms. Agee specifically targets allegations in Paragraphs 10-14, 26, 35-36, 44, 57, 60, 65, 70, 74-77, 83, 86-88, and 91 of the Amended Indictment because, she argues, these allegations are irrelevant, prejudicial, and inflammatory and are likely to cause juror confusion of the issues. She also asks the Court to strike Paragraphs 82 and 105 because these paragraphs have no relevance to any of the counts and are unfairly prejudicial and inflammatory. These paragraphs contain expansive allegations concerning the SBA's policies, standard operating procedures, loan programs, and loan requirements as well as allegations of violations of the SBA's policies and regulations.
Ms. Agee argues that the surplusage in the Amended Indictment serves no purpose other than to distract the jury from the Government's burden of proof on each element of the crimes charged by attempting to establish violations of civil regulations applicable to the SBA lending program. However, because the Government is not seeking civil remedies, the civil regulations are not relevant to proving the crimes charged in the Amended Indictment.
Ms. Agee is charged with wire fraud in the context of allegedly making false statements to the SBA. Thus, she asserts allegations that she violated SBA regulations, policies, or standard operating procedures are not necessary to establish a violation of the wire fraud statute. See 18 U.S.C. § 1343; see also United States v. Buncich, 926 F.3d 361, 366 (7th Cir. 2019) (). An outline of SBA policies and procedures is unnecessary to prove a conspiracy tocommit wire fraud affecting a financial institution or wire fraud affecting a financial institution. Ms. Agee argues all allegations that she or the other co-Defendants violated SBA regulations are surplusage. They are surplusage because they are allegations that "would have . . . no legal relevance if proved." Miller, 471 U.S. at 137. Concerning references to SBA rules and policies, they are surplusage because they constitute "nothing more than background and contextual information." United States v. Groos, 616 F. Supp. 2d 777, 790 (N.D. Ill. 2008). She contends that the surplusage invites the jury to make a "judgment of Ms. Agee based on how well she followed the SBA's civil regulatory scheme." (Filing No. 136 at 7.)
Additionally, Ms. Agee argues that the allegations in "Paragraphs 10-14, 26, 35-36, 44, 57, 60, 65, 70, 74-77, 83, 86-88 and 91, outlined above, create the highly inflammatory and prejudicial perception that violations of the civil regulatory scheme governing the SBA lending program are, in and of themselves, criminal conduct." Id. at 10. "Separately, Paragraphs 82 and 105 are also inflammatory as against Ms. Agee because (as established above) these paragraphs are not relevant to the charges against her." Id. at 11. She argues that Paragraph 82 contains an inflammatory and prejudicial implication that she is responsible for others' actions, and Paragraph 105 would only inflame the jury by broadening the allegations against her to somehow include her disagreement with SBA policy. Ms. Agee asserts that the surplusage likely will confuse the jury and prejudice the Defendants.
The Government opposes Ms. Agee's Motion, and explains, "Words that are employed in an indictment that are descriptive of that which is legally essential to the charge in the indictment cannot be stricken out as surplusage." United States v. Root, 366 F.2d 377, 381 (9th Cir. 1966); see also United States v. Apodaca, 275 F. Supp. 3d 123, 156 (D.D.C. 2017) (). TheGovernment contends that Ms. Agee has been charged with defrauding the SBA's 7(a) guaranty program, yet she somehow believes that the rules governing that program are irrelevant to the charges, and, thus, references to them in the Amended Indictment should be removed. However, the Government notes, surplusage should be stricken only if the allegations are immaterial, irrelevant, and prejudicial, and none of the challenged allegations, which concern the SBA's rules and processes and the Defendants' efforts to thwart them, run afoul of this standard.
The Government asserts that the allegations concerning the SBA rules and processes are highly relevant to multiple elements of the charged crimes of conspiracy to commit wire fraud affecting a financial institution and wire fraud affecting a financial institution. The Government must prove materially false representations by the Defendant, and the SBA rules and processes are relevant to the element of materiality. The SBA's 7(a) guaranty program is necessarily governed by rules and regulations, and to coherently allege why the Defendants' misrepresentations were material to the SBA's decision to guaranty loans and purchase defaulted loans, there have to be allegations as to what rules the SBA employees were attempting to follow in the first place.
The Government further argues the allegations are relevant to whether the Defendants' representations were false. The Defendants are alleged to have made a false certification on a loan purchase request, which is a certification that had to be made for the SBA to honor the loan guarantee. And the false certifications incorporated and referred to the SBA's program requirements, which Ms. Agee now wants stricken from the Amended Indictment. The Government cannot allege and subsequently prove how a certification is false without also alleging what the requirement is that is being certified by the Defendants. The allegations also are relevant to the Defendants' motive and intent to defraud by showing that they knew the SBA's rules and originated loans to circumvent those rules.
The Government also asserts that the SBA's rules and processes are relevant to the element...
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