United States v. Lindberg
| Decision Date | 30 January 2020 |
| Docket Number | DOCKET NO. 5:19-CR-00022-MOC-DSC |
| Court | United States District Courts. 4th Circuit. Western District of North Carolina |
| Parties | UNITED STATES OF AMERICA, v. 1) GREG E. LINDBERG, 2) JOHN D. GRAY, 3) JOHN V. PALERMO, JR., and 4) ROBERT CANNON HAYES, Defendants. |
THIS MATTER is before the Court on Motions to Dismiss the Indictment, filed by defendants Greg Lindberg, John Gray, and John Palermo, Jr., pursuant to Federal Rule of Criminal Procedure 12(b). Lindberg and Gray both move to dismiss for failure to state an offense. (Doc. Nos. 64, 85). Palermo moves to dismiss for lack of specificity and for prosecutorial misconduct. (Doc. Nos. 95-96). For reasons discussed below, each motion to dismiss is denied.
On March 18, 2019, a grand jury in the United States District Court for the Western District of North Carolina returned an indictment, charging Lindberg, Gray, Palermo, and Hayes with one count of conspiracy to commit honest services fraud, in violation of 18 U.S.C. § 1349, and one count of bribery concerning programs receiving federal funds and aiding and abetting the same, in violation of 18 U.S.C. §§ 666(a)(2) and 2.1 For these motions, the allegations in that indictment are taken as true. See United States v. Engle, 676 F.3d 405, 415 (4th Cir. 2012).
From about April 2017 to August 2018: Lindberg served as the chairman of Eli Global, an investment company, and as owner of Global Bankers Insurance Group ("GBIG"), an insurance and reinsurance management company; Gray worked as Lindberg's consultant; Palermo operated as a vice president of Eli Global and as chairman of a Chatham County political party; and Robert Hayes served as chairman of a North Carolina state political party. (Doc. No. 3 ¶¶ 3-6). In those capacities, the defendants allegedly conspired to and "corruptly gave, offered, and promised things of value to [the Commissioner of the North Carolina Department of Insurance], including millions of dollars in campaign contributions . . ., in exchange for specific official action favorable to GBIG, including the removal of the Senior Deputy Commissioner of the [Department] responsible for overseeing the regulation, including the pending periodic examination, of GBIG." (Id. ¶ 14).
The indictment substantiates the alleged conspiracy in detail. Pertinent here, it asserts that Lindberg, Gray, and Palermo "surreptitiously met with the Commissioner at various locations throughout North Carolina . . . to discuss Lindberg's request for the removal of [the] Senior Deputy . . . in exchange for millions of dollars in campaign contributions to the Commissioner." (Id. ¶ 15). The first referenced meeting occurred on February 14, 2018, at Concord, North Carolina, and included Lindberg, Gray, and the Commissioner. There, Lindberg purportedly complained about the Senior Deputy, indicated she was "deliberately and intentionally and maliciously hurting [his] reputation with other regulators," and "suggested that the Commissioner hire Palermo at the [Department] in place of, or in a superior role to," the Senior Deputy. (Id. ¶¶ 31-32).
A second meeting allegedly occurred on March 5, 2018, in Statesville, North Carolina, and this time, Palermo attended as well. At that meeting, the Commissioner indicated he might be able to hire Palermo by April 1, to which Lindberg responded, "that'd be a homerun." (Id. ¶ 36). Gray suggested that Palermo should "report directly to [the Commissioner] so nobody at the[Department] could question what Palermo was doing" and that the Commissioner should "set it so that if [the Senior Deputy] stays where she is, she doesn't breathe a word outside that office, or send a slip of paper outside that office, that is not reviewed first by [Palermo]." (Id. ¶ 37). The Commissioner asked to speak with Lindberg alone, then inquired, "What's in it for me?" (Id. ¶ 38). "Lindberg responded he would create an independent expenditure committee to support the Commissioner's re-election and fund it himself with $1 million to $2 million." (Id.).
Lindberg, Gray, Palermo, and the Commissioner met again on March 27, 2018, in the GBIG headquarters in Durham, North Carolina. This time, the Commissioner intimated "he did not think it would be a good idea to hire Palermo at the [Department], as it would be well known that Palermo came from Lindberg's company." (Id. ¶ 42). Lindberg agreed, suggesting "the Commissioner should instead move [the Senior Deputy] to another Division of the [Department] and move the head of the other Division . . . to [the Senior Deputy's] position." (Id. ¶ 43).
The indictment goes on to allege several additional meetings and communications where the defendants pressed the Commissioner for the removal and replacement of the Senior Deputy in exchange for donations. And on May 22, 2018, Palermo emailed the Commissioner and "requested certain information necessary to establish the independent expenditure committee." (Id. ¶ 53). Three days later, Palermo emailed Lindberg and Gray to let them know "independent expenditure committee to support the Commissioner would be ready in two weeks." (Id. ¶ 54).
On May 29, 2018, Lindberg and Gray met with the Commissioner at Lindberg's home in Durham. There, Gray summarized their proposal as follows: "if you're willing to have [the other Division head] handle everything from [GBIG], then we'll . . ." (Id. ¶ 57). At that point, Lindberg interjected, "We'll put the money in the bank." (Id.). Lindberg and Gray then called Palermo to discuss funding the independent expenditure committee. During that discussion, Lindbergconfirmed he would put $1.5 million into the committee and donate another $500,000 to the North Carolina State political party, for a total of $2 million. The Commissioner then agreed to "make the switch when we all get this . . .," to which Lindberg interjected, "Get the check cleared." (Id. ¶ 58). The Commissioner confirmed, and Lindberg replied, "That's a homerun." (Id.).
Later, Palermo sent Lindberg an email, stating he had created two corporate entities for the independent expenditure committee. Lindberg wrote a check to one entity for $500,000 and $1 million to the other. Palermo cashed the checks, telling Lindberg and Gray, "[i]n essence, for you[r] conversations with [the Commissioner], the 2 entities are ready to go." (Id. ¶ 60). On June 19, Gray informed the Commissioner that the committee was funded with $1.5 million. (Id. ¶ 61). But by July 6, the Commissioner still had not made the staffing change. Palermo thus sent an email to Lindberg, labeled "For Internal Use Only," stating "the Commissioner needs to man-up and do what he agreed to do" and to provide "an end date for it to happen." (Id. ¶ 63).
On July 25, 2018, Lindberg, Gray, and the Commissioner held a final meeting to discuss a "date certain" for the staffing change. (Id. ¶ 68). There, the Commissioner stated he was unhappy with the expenditure committee, so (Id. ¶ 71). Lindberg directed Gray to (Id. ¶ 72). Hayes agreed to facilitate the transfer, and the next day, the funds were placed into the Commissioner's campaign account. Subsequently, the defendants were indicted, which led Lindberg, Gray, and Palermo to move for dismissal.
The Federal Rules of Criminal Procedure "were designed to eliminate technicalities in criminal proceedings." United States v. Resendiz-Ponce, 549 U.S. 102, 110 (2007). To that end, federal indictments need only contain a "plain, concise, and definite statement of the essential facts constituting the offense charged." Fed. R. Crim. P. 7(c)(1). An indictment is therefore "legally sufficient (1) if it alleges the essential elements of the offense, that is, it fairly informs the accused of what he is to defend; and (2) if the allegations will enable the accused to plead an acquittal or conviction to bar a future prosecution for the same offense." United States v. Rendelman, 641 F.3d 36, 43 (4th Cir. 2011); see Hamling v. United States, 418 U.S. 87, 117 (1974).
Despite these meager requirements, Federal Rule of Criminal Procedure 12 empowers the district court to dismiss indictments "where there is an infirmity of law in the prosecution." Engle, 676 F.3d at 415 (citation omitted). Under Rule 12(b)(3)(B)(v), the Court may dismiss an indictment for "failure to state an offense." And under Rule 12(b)(3)(B)(iii), the Court can dismiss an indictment for "lack of specificity." Even so, when confronted with a challenge to the indictment, the Court is "ordinarily limited to the allegations contained in the indictment." Engle, 676 F.3d at 415. In other words, the Court "may not dismiss an indictment . . . on a determination of facts that should [be] developed at trial." Id. (citation omitted).
Lindberg, Gray, and Palermo each contend the indictment is infirm and must be dismissed. Lindberg and Gray assert the indictment should be dismissed under Rule 12(b)(3)(B)(v) as it rests on a legally flawed understanding of honest services fraud and federal funds bribery. Lindberg argues the indictment should be dismissed: under Rule 12(b)(3)(B)(iii) because it is insufficiently specific as to his scienter and role in the conspiracy; and under the Court's supervisory powers because of prosecutorial misconduct. The Court rejects these arguments in turn.
In the indictment, the defendants were charged with conspiring to deprive North Carolina and its citizens of the honest...
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