United States v. Brian Ganos, Mark Spindler, Sonag Co.
| Decision Date | 26 February 2019 |
| Docket Number | Case No. 18-cr-62-pp |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. BRIAN GANOS, MARK SPINDLER, SONAG COMPANY, INC., and NUVO CONSTRUCTION COMPANY INC., Defendants. |
| Court | U.S. District Court — Eastern District of Wisconsin |
ORDER ADOPTING JUDGE JONES'S REPORT AND RECOMMENDATION (DKT. NO. 87) AND DENYING DEFENDANT SPINDLER'S MOTION TO DISMISS COUNTS ONE AND TWENTY-FIVE OF THE SUPERSEDING INDICTMENT (DKT. NO. 43)
Defendant Mark Spindler filed a motion to dismiss Count One (conspiracy to engage in mail and wire fraud) and Count Twenty-Five (misprision of a felony) of the May 1, 2018 superseding indictment under the Fifth Amendment and Rules 7 and 12(b) of the Federal Rules of Criminal Procedure. Dkt. No. 43. The defendant argues that the government failed to allege essential mens rea elements: he asserts that Count One fails to allege the specific intent to defraud and Count Twenty-Five fails to allege that the defendant knew the offense allegedly committed by co-defendant Brian Ganos was a felony. Id. at 1. Magistrate Judge David E. Jones issued a report, recommending that this court deny the motion. Dkt. No. 87. Judge Jones concluded that the elements of the underlying crime did not need to be alleged for the conspiracy count (Count One) and that the language of Count Twenty-Five tracked the statutory language. The defendant since has filed an objection to the recommendation, arguing that the superseding indictment fails to provide sufficient notice or act as a proper bar against subsequent prosecutions. Dkt. No. 93. The defendant indicates that he is not asking for dismissal with prejudice; he says that if the court sustains his objection, he expects that the government will file a second superseding indictment properly alleging the scienter requirements. Dkt. No. 93 at 4.
Under Federal Rule of Criminal Procedure 59(b)(3), the district court must "determine de novo any part of the magistrate judge's disposition that has been properly objected to." The district judge may accept the magistrate judge's recommendation, reject it or modify it. 28 U.S.C. § 636(b)(1).
In the brief in support of his motion, the defendant argues that he plays a "very small part of a very large indictment that focuses on Brian Ganos." Dkt. No. 44 at 1. While the defendant concedes that the government clearly believes Ganos defrauded the United States, he argues that the indictment lacks the same clarity in its treatment of him. Id. He asserts that Count One, the conspiracy count, fails to allege that he acted with intent to defraud. Id. He asserts that Count Twenty-Five fails to allege that he knew Ganos was committing a crime punishable by more than a year in prison. Id. at 1-2.
The government responded that Count One specifically alleges that the defendant "knowingly conspired" with Ganos, Sonag Company, Nuvo Construction Company and others to "devise and participate in a scheme to defraud" various government entities and to obtain money based on "materially false and fraudulent pretenses." Dkt. No. 61 at 2. The prosecution points out that the first thirty-eight paragraphs of the superseding indictment contain allegations that the defendant advised Ganos and the others about procedures to conceal the scheme, prepared separate financial statements (one for bidding on government contracts and one for bonding), and made materially false statements to federal investigators to conceal the affiliations between the companies to further the conspiracy. Id. at 8.
With respect to Count Twenty-Five, the government asserted that that count tracks the language of the statute (18 U.S.C. §4), stating that the defendant "ha[d] knowledge that Brian L. Ganos committed the crime of conspiracy to commit money laundering . . . ." Id. at 10. The government points out that the Ninth Circuit's recent decision in United States v. Olson, 856 F.3d 1216 (9th Cir. 2017)—which the defendant cited in support of his motion to dismiss Count Twenty-Five (dkt. no. 44 at 5)—concerns the degree of knowledge the government must prove at trial, not the degree of knowledge that must be pled in the indictment. Id. at 11.
Judge Jones concluded that the superseding indictment "easily" satisfied the test that a conspiracy charge contain allegations "clearly identifying the offense defendants conspired to commit . . . ." Dkt. No. 87 at 6 (quoting United States v. Kahn, 381 F.2d 824, 828 (7th Cir. 1967)). He found that Count One alleged that the defendant "knowingly conspired with his co-defendants to devise and participate in a scheme to defraud the United States, the State of Wisconsin, Milwaukee County and other entities, and to obtain payments on contracts and purchase orders by means of materially false and fraudulent pretenses, representations and promises, and with the use of the United States mail and interstate wire communications." Id. (). He noted that paragraphs 3 through 38 of the superseding indictment "fulsomely" described the fraud scheme, "detailing pertinent background information, the individuals involved in the conspiracy and their specific roles, the manner and means of the conspiracy, and the steps the co-conspirators took to conceal the conspiracy." Id.
Judge Jones also concluded that the superseding indictment sufficiently alleged that the defendant possessed fraudulent intent. Id. at 7. He pointed out that paragraph 2 described the straw owners who were solicited to fraudulently obtain contracts to which they were not entitled. Id. Finally, Judge Jones focused on the language in paragraph 12, alleging that the defendant had "contributed to this conspiracy-to-defraud via the outside accounting services he performed for Ganos-affiliated companies." Id. Judge Jones laid out the specific outside services alleged in paragraph 12:
advis[ing] Ganos and others on bookkeeping, accounting, and payroll procedures and transactions that facilitated and concealed the scheme; concealing the scheme, attend[ing] meetings and engag[ing] in other interactions whereby he learned that Mr. Ganos and others were using straw owners to fraudulently obtain government set-aside contracts; prepar[ing] two sets of financial statements for Sonag Company, Nuvo, C3T, and Sonag Ready Mix—individual statements for each company for use in bidding for government set-aside contracts and consolidated statements for use in obtaining bonding; and l[ying] to investigators about whether C3T was affiliated with Nuvo or Sonag Company.
Id. From this detailed recitation, Judge Jones concluded that "it can be inferred from [the defendant's] knowledge of the scheme and conduct in furtherance thereof that he acted with the intent to defraud." Id.
Finally, Judge Jones found that the superseding indictment sufficiently alleged the elements of misprision of a felony under 18 U.S.C. 4. Id. at 8. He determined that the language in the superseding indictment tracked the language of 18 U.S.C. §4. Dkt. No. 87 at 8. Judge Jones rejected the defendant's argument that the Ninth Circuit's decision in Olson, 856 F.3d at 1220, required the indictment to allege that the defendant knew that conspiracy to commit money laundering (the crime the defendant allegedly took steps to conceal and failed to notify authorities about) was a felony. Id. at 8-9. Judge Jones pointed out that the Seventh Circuit had not adopted the reasoning in Olson, and that Olson involved a challenge to the sufficiency of the evidence at trial and not whether the indictment conforms to minimal constitutional standards. Id. at 9. He concluded that the fact that the superseding indictment did not allege the defendant knew that money laundering was a felony was a "hypertechnical" reading of the superseding indictment. Id.
The defendant's objection reasserts the arguments he made in the brief supporting his motion to dismiss. Dkt. No. 93 at 1. The defendant insists that because the government cannot prove the conspiracy charge without proof that he acted with specific intent to defraud, the superseding indictment must contain this specific allegation, or it will "leave[] [him] vulnerable to a conviction 'on the basis of facts not found by, and perhaps not even presented to, the grand jury which indicted him.'" Id. at 3 (quoting Russell v. United States, 369 U.S. 749, 770 (1962)). As to Count Twenty-Five, the defendant concedes that Olson is not controlling. Id. He says his real argument is that the Supreme Court has held that "'[a]bsent some indication of contrary purpose in the language or legislative history of the statute,' courts 'ordinarily read a phrase in a criminal statute that introduces the elements of a crime with the word "knowingly" as applying that word to each element in the statute.'" Id. (quoting Flores-Figueroa v. United States, 556 U.S. 646, 652 (2009); Elonis v. United States, ___ U.S. ___, 135 S. Ct. 2001, 2009 (2015)). The defendant argues that this holding requires, as an element of misprision of the felony of money-laundering, that the government prove the defendant knew that money laundering is a felony, and that the superseding indictment is constitutionally deficient if it does not state as much. Id. at 3-4.
A motion under Rule 12 tests the sufficiency of the indictment. Fed. R. Crim. P. 12(b)(3). Rule 7 requires that the indictment contain a "plain, concise, and definite written statement of the essential facts constituting the offense charged." Fed. R. Crim. P. 7(c)(1). An indictment "that 'tracks' the words of a statute to state the elements of the crime is generally acceptable, and while there must be enough factual particulars so the defendant is aware of the specific conduct at issue, the presence or absence of any particular fact is not dispositive." United States v. White, 610 F.3d 956, 958-959 (7th Cir. 2010) (citing ...
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