United States v. Dorfman

Decision Date18 November 1971
Docket NumberNo. 71 Cr. 1177.,71 Cr. 1177.
PartiesUNITED STATES of America, v. Allen DORFMAN, Defendant.
CourtU.S. District Court — Southern District of New York


Whitney North Seymour, Jr., U. S. Atty. for Southern District of New York, for plaintiff; by Richard BenVeniste, New York City, of counsel.

Harris, Burman & Silets, Chicago, Ill., for defendant; by Harvey M. Silets, Chicago, Ill., of counsel.

GURFEIN, District Judge.

The defendant, an alleged agent of a pension fund, has been indicted in seven counts for conspiracy to solicit kickbacks in violation of 18 U.S.C. §§ 1954, 1341 and 1343 (Count 1); for the substantive offense of agreeing to receive and receiving a kickback in violation of § 1954 (Count 2); and for the substantive offenses of wire (Counts 3-5) and mail (Counts 6-7) fraud in violation of §§ 1343 and 1341, respectively. The transaction involved a loan from the Central States, Southeast and Southwest Areas Pension Fund to the Neisco Corporation, through Neisco's President George A. Horvath. The defendant now makes a series of six motions which I will consider in sequence.

First, the defendant moves pursuant to Fed.R.Crim.P. 21(b) for a change of venue to the Northern District of Illinois, Eastern Division. He stresses: (1) that the Pension Fund and the residences of defendant and his counsel are located in the Chicago area; (2) that "nearly every significant act alleged in the indictment took place in whole or in part in Chicago"; and (3) that many of the witnesses and records will have to come from Chicago.

The Government, on the other hand, argues: (1) that as a general rule a criminal prosecution should be retained where the indictment was returned and where the Grand Jury investigation and trial preparation were made; see United States v. United States Steel Corp., 233 F.Supp. 154, 157 (S.D.N.Y.1964); (2) that trial here is imminent, the cause being set down for November 30, while transfer would entail a considerable delay; and (3) that Neisco Corporation and its President George A. Horvath are located and reside in New York.

For the purposes of this motion, it is conceded by both sides that venue may lie either in this District or in the Northern District of Illinois. The matter is, therefore, for the discretion of the Court. Fed.R.Crim.P. 21(b); Platt v. Minnesota Mining & Mfg. Co., 376 U.S. 240, 84 S.Ct. 769, 11 L.Ed.2d 674 (1964).

The cases cited by the defendant are not compelling upon their facts. United States v. Jessup, 38 F.R.D. 42, 45 (M.D. Tenn.1965) involved a trial which promised to be much longer than the trial of this defendant will likely be. United States v. Olen, 183 F.Supp. 212 (S.D. N.Y.), mandamus denied sub nom. United States v. Cashin, 281 F.2d 669 (2 Cir. 1960), involved the filing of a false proxy statement as well as a Section 17 violation under the 1933 Act. The basis of the charge was the "allegedly fraudulent maintaining of the books and records" which were in Alabama. Nearly all the witnesses resided in Alabama; and the defendants were "in financial straits." On these factors, the Court granted a change of venue.

In this case, I find the arguments of the Government more persuasive. Here the books and records of the Pension Fund in Chicago do not appear to be directly involved; there is no claim that they are false. There is no claim of financial hardship. The principal witness for the Government resides in New York. The Government's preparation for trial has been done here. The trial is imminent. The defendant and his counsel would obviously find it more convenient for the trial to take place in Chicago, but since the trial is not likely to be protracted the inconvenience to them is not so great as to be unfair. A defendant has, of course, no constitutional right to be tried at his home, although his residence is a factor to be considered, and I have taken it into account among the other factors. Platt v. Minnesota Mining & Mfg. Co., supra, 376 U.S. at 245-246, 84 S.Ct. 769.

The motion for a change of venue is denied.

Second, the defendant moves to dismiss Counts three through five (the wire fraud counts) and Counts six and seven (the mail fraud counts) of the indictment. The Government has indicated that it will dismiss Counts six and seven. There remain for immediate consideration, then, the substantive counts charging violation of the wire fraud statute (18 U.S.C. § 1343).

In Counts three to five the indictment charges that from about February 1, 1967 to the filing of the indictment the defendant "unlawfully, wilfully and knowingly did devise and intend to devise a scheme and artifice to defraud and for obtaining money and property by means of false and fraudulent pretenses. It was the object of said scheme and artifice to defraud that defendant and said co-conspirators would cause and attempt to cause said Pension Fund to loan the Neisco Corporation the sum of $1,500,000." Paragraphs five and six of the conspiracy count are then realleged in the substantive Counts three to five. These paragraphs are set out in the margin.* It is finally alleged that, "for the purpose of executing said scheme and artifice to defraud," the defendant caused certain wire communications to be transmitted.

The gravamen of the indictment, on its face, is the "scheme and artifice to defraud" and quite clearly not the "obtaining money and property by means of false and fraudulent pretenses," although both are mentioned. While in some cases one may charge both types of wire fraud, the Government's theory, quite clearly set forth in paragraphs five and six of the indictment, is that the victim of the fraud was the Pension Fund from which the defendant was to obtain approval for a loan to be made to the Neisco Corporation, without divulging to the Board of Trustees of the Pension Fund that he was receiving a fee, kickback or commission from Horvath. In other words, the essence of the offense charged is the devising of a scheme or artifice to defraud the Pension Fund whereby the defendant was allegedly to receive money secretly, while purporting to give his best judgment to the Pension Fund without any consideration in mind other than the best interests of the Pension Fund.

The defendant grounds his motion, first, on the theory "that the asserted fraud was the obtaining of money and property by means of false and fraudulent pretenses." He then mounts his attack upon the sufficiency of the indictment by citing cases which purportedly establish that, in an indictment charging false representations to obtain money or property, the name of the person defrauded must be clearly alleged. In the first place, it is clear that here the scheme is not essentially founded on false representations which might indeed require a very specific naming of the victim. But more importantly, the name of the defrauded party, the Pension Fund, is fairly disclosed. The indictment is, therefore, of sufficient particularity to enable the defendant to prepare his defense and to protect himself against any second prosecution for the same offense. Moreover, in practical terms, any element of surprise of which the defendant might complain has been removed by the responses to the defendant's extensive bills of particulars. See United States v. Brown, 335 F.2d 170, 172 (2 Cir. 1964); United States v. Pilnick, 267 F.Supp. 791, 795 (S.D.N.Y.1967).

The second ground of asserted insufficiency is that the indictment fails to "charge the defendant with obtaining any money or property from the Pension Fund as a result of the asserted scheme to defraud the Pension Fund." This argument is not tenable. It is not necessary to charge that the alleged kickback money obtained by the defendant actually came from the victim, or in this case, from the proceeds of the loan. It is enough that the defendant, who is alleged to have owed a fiduciary duty to the Fund by virtue of his position, agreed to use that fiduciary position to favor the Neisco loan in return for a cash payment that would not be disclosed to the Fund. In various contexts, the breach of the trust of a fiduciary who uses his position to make secret profits has been held to be fraud within the meaning of the wire and mail fraud statutes. See Post v. United States, 132 U.S. App.D.C. 189, 407 F.2d 319, 329 (1968), cert. denied, 393 U.S. 1092, 89 S.Ct. 863, 21 L.Ed.2d 784 (1969); United States v. Groves, 122 F.2d 87, 90 (2 Cir.), cert. denied, 314 U.S. 670, 62 S.Ct. 135, 86 L.Ed. 536 (1941); Shushan v. United States, 117 F.2d 110, 115 (5 Cir.), cert. denied, 313 U.S. 574, 61 S.Ct. 1085, 85 L.Ed. 1531 (1941); United States v. Hoffa, 205 F.Supp. 710, 716 (S.D.Fla. 1962). And in any event, the actual obtaining of money from the victim is not essential. United States v. Whiting, 308 F.2d 537, 540 (2 Cir. 1962), cert. denied, Crowe v. United States, 372 U.S. 909, 83 S.Ct. 722, 9 L.Ed.2d 718 (1963).

While the foregoing disposes of the motion to dismiss the indictment I am convinced that the allegation respecting the "obtaining money or property by means of false and fraudulent pretenses" is surplusage. Such an allegation would apply if the defendant were charged with obtaining the money from Horvath by pretending falsely that he would influence the action of the Pension Fund when he had no intention of so doing. But that is not the Government's theory, as is shown by the continued emphasis on "the scheme and artifice to defraud" without reference to "obtaining money by false pretenses." The charge is that the scheme was actually to influence the Fund for Horvath's benefit, not to fool Horvath out of a kickback the defendant never intended to earn.

In these circumstances, the defendant is entitled to a clear statement of...

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