United States v. Dupree
| Decision Date | 25 October 2012 |
| Docket Number | 10-CR-627 (S-2)(KAM) |
| Parties | UNITED STATES OF AMERICA v. COURTNEY DUPREE, Defendant. |
| Court | U.S. District Court — Eastern District of New York |
On December 30, 2011, after a jury trial, defendant Courtney Dupree ("defendant") was convicted of a conspiracy to commit bank fraud, bank fraud, and two counts of making a false statement in connection with a complex $18 million scheme to defraud Amalgamated Bank by obtaining or attempting to obtain loans on the basis of false financial statements and other material misrepresentations between January 2007 and July 2010. Presently before the court are Mr. Dupree's motions for a judgment of acquittal pursuant to Federal Rule of Criminal Procedure 29 ("Rule 29"), or alternatively, a new trial pursuant to Federal Rule of Criminal Procedure 33 ("Rule 33"). For the reasons set forth below, Mr. Dupree's motions are denied.
Mr. Dupree, a Wharton Business School graduate and the chief executive officer of GDC Acquisitions, LLC ("GDC"), wascharged in all five counts of a five-count Second Superseding Indictment. (See ECF No. 295, Second Superseding Indictment ("S-2 Indictment").) Count One charged Mr. Dupree with Conspiracy to Commit Bank, Mail, and Wire Fraud in violation of 18 U.S.C. §§ 1349, 3551 et seq. (Id. ¶¶ 18-19.) Count Two charged Mr. Dupree with Bank Fraud in violation of 18 U.S.C. §§ 2, 1344, 3551 et seq. (Id. ¶¶ 20-21.) Counts Three and Four charged Mr. Dupree with Making a False Statement on or about January 6, 2010 and May 24, 2010, respectively, by "willfully overvalu[ing] property and security, for the purpose of influencing the action of Amalgamated Bank upon one or more loans" in violation of 18 U.S.C. §§ 2, 1014, 3551 et seq. (Id. ¶¶ 22-25.) Finally, Count Five charged Mr. Dupree with an additional count of Bank Fraud in violation of 18 U.S.C. §§ 2, 1344, 3551 et seq. (Id. ¶¶ 26-27.)1
Thomas Foley, GDC's outside counsel and subsequently its general counsel and chief operating officer, was also charged in Counts One, Two, and Four of the S-2 Indictment. Rodney Watts, GDC's chief financial officer ("CFO") and chief investment officer, was charged in Counts One through Four of the S-2 Indictment. Mr. Foley went to trial with Mr. Dupree and was acquitted of all charges, and Mr. Watts' trial was stayedpending a Second Circuit appeal and is currently scheduled to begin on March 11, 2013.
The core of the fraud charges in the S-2 Indictment are that Mr. Dupree, together with others, deliberately engaged in a scheme to defraud Amalgamated Bank ("Amalgamated) by falsely overstating accounts receivable figures on borrowing base certificates provided to Amalgamated, which were used to determine the amount that GDC's subsidiaries could borrow from Amalgamated in any given month. (Id. ¶¶ 8-17.) Additionally, it was alleged that Mr. Dupree further defrauded Amalgamated by having GDC covertly purchase Image Lighting, Inc. in violation of the loan agreement with Amalgamated, and concealing the purchase from Amalgamated. (Id. ¶ 15.) Finally, the S-2 Indictment charged Mr. Dupree with attempting to obtain approximately $5 million in funding from C3 Capital, LLC ("C3 Capital"), a private equity investment firm, by submitting false financial statements and accounts receivable aging reports to C3 Capital that fraudulently inflated GDC's accounts receivable. (Id. ¶ 16.)
After jury selection on December 5, 2011, trial commenced with opening statements the following day on December 6, 2011. The government presented evidence over the course ofthe next two weeks and rested its case on December 20, 2011. Mr. Dupree then presented a defense case over the next week consisting of, inter alia, character witnesses as well as his own testimony, and Mr. Foley also presented an expert witness in legal ethics. After Mr. Dupree and Mr. Foley rested their cases on December 27, 2011, the parties gave their closing arguments on December 28 and 29, 2011. Finally, on December 29, 2011, the jury was charged and began deliberations.
On December 30, 2012, the jury returned its verdict finding Mr. Dupree guilty of Counts One through Four and acquitting Mr. Foley of all charges. (See ECF No. 506, Jury Verdict.) Specifically, with respect to Count One, the jury found that Mr. Dupree conspired to commit bank fraud but that he did not conspire to commit mail or wire fraud. (Id. at 1.) The jury was retained to determine issues of forfeiture in a separate phase of the trial following the guilty verdict. See Fed. R. Crim. P. 32.2(b)(5). On January 3, 2012, the jury found that Mr. Dupree was liable for a forfeiture money judgment in the amount of $18,157,000 as representing proceeds traceable to the offenses for which he was convicted, and that the funds in eight bank accounts and a tax refund were also subject to forfeiture as representing property traceable to those offenses. (See ECF No. 511, Special Verdict Sheet for Forfeiture.)
The case against Mr. Dupree involved a month-long trial with the testimony of over 25 witnesses, hundreds of exhibits consisting of emails and lengthy financial documents, and recorded conversations made by a government cooperator. Given the complexity of the fraud scheme, the immense volume of evidence presented at trial, and the "heavy burden" faced by Mr. Dupree in challenging the sufficiency of the evidence supporting his conviction, the court will not attempt to summarize all the evidence supporting Mr. Dupree's conviction but will highlight the most compelling evidence - which is quite extensive - from which the jury could find beyond a reasonable doubt the essential elements of the crimes charged. See United States v. Davis, 690 F.3d 127, 131-32 (2d Cir. 2012). In summarizing the evidence at trial, the court is mindful that "[i]n reviewing a challenge to the sufficiency of the evidence underlying a guilty verdict, [the court] 'must review the evidence in the light most favorable to the government, drawing all reasonable inferences in its favor.'" United States v. Cain, 671 F.3d 271, 302 (2d Cir. 2012) (quoting United States v. Gaskin, 364 F.3d 438, 459 (2d Cir. 2004)).
As discussed below, in addition to the physical and documentary evidence presented, the majority of the government's case is based on the testimony of three former employees of GDCwho cooperated with the government and pleaded guilty to participating in a conspiracy to commit bank fraud with Mr. Dupree. These former employees include (1) Emilio Serrano, GDC's former assistant comptroller; (2) Irma Nusfaumer, GDC's former comptroller; and (3) Frank Patello, GDC's former CFO. All three of these former employees face a maximum prison sentence of 30 years at sentencing for their participation in the bank fraud conspiracy.
At all relevant times between January 2007 and July 2010, Mr. Dupree was the chief executive officer and nearly sole owner of GDC.2 (Tr. 412, 1973, 2215.) GDC was a holding company that had three wholly-owned primary operating subsidiaries, all of which were acquired by GDC prior to 2007: (1) JDC Lighting, LLC ("JDC Lighting"), which sold commercial lighting fixtures for commercial property; (2) Unalite Electric and Lighting, LLC ("Unalite"), a lighting maintenance company for corporations and other large enterprises; and (3) Hudson Bay Environments Group, LLC ("Hudson Bay"), which sold commercial office furniture to schools, hospitals, and government entities (GDC, together with JDC Lighting, Unalite, and Hudson Bay, the "Company"). (Tr. 376-78, 416-417, 1367, 1974.) As of April 2007, GDC's officeswere located in Long Island City in Queens, New York. (Tr. 1696-97.)
In or around April or May of 2008, George Jarvis, a loan officer for Amalgamated, first became aware of GDC and met with Mr. Dupree, Mr. Watts, and Mr. Patello regarding a possible loan to the Company. (Tr. 1971-73, 2229.) At the time of that meeting, Mr. Watts was GDC's chief investment officer and Mr. Patello was GDC's CFO. (Tr. 1973, 2229.) In connection with this meeting, Mr. Dupree and his employees provided Amalgamated with information concerning the financial condition of the Company, including audited financial statements, accounts receivable reports3 , aging reports, backlog reports, and acquisition documents for companies acquired, such as Hudson Bay. (Tr. 1974, 2229-31.)
In connection with a loan application by the Company, Amalgamated was provided the draft consolidated financial statements of the Company for the period ending December 31, 2007, which were prepared by an independent auditor based on information provided by the Company (the "2007 Financial Statement"). (Government Exhibit ("GX") 148; Tr. 1975-77.) The 2007 Financial Statement represented that "[t]he Companyrecognizes revenue at the time products are delivered to customers or when maintenance services are provided" (the "Revenue Recognition Policy"). (GX 148 at 7.) Mr. Jarvis testified that the 2007 Financial Statement, particularly the Revenue Recognition Policy, the net income figures, and the availability of collateral, played an important role in Amalgamated's decision to loan money to the Company. (Tr. 1977-78, 1992.) Specifically, the Revenue Recognition Policy was important because when the Company booked a sale and recognized revenue, it created a receivable that was collateral for the Amalgamated loan. (Tr. 1978.) Additionally, net income was important because it showed that the Company was viable, was growing its equity base, and had the ability to generate cash flow to repay a loan. (Tr. 1978-79.)
Mr. Patello testified that the 2007 Financial Statement falsely reported the Company's net income to be approximately $1.547 million when it was only half that amount, or approximately $720,000, and...
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