United States v. Liu
| Decision Date | 24 January 2018 |
| Docket Number | CRIMINAL NO. 1:16-CR-42 |
| Parties | UNITED STATES OF AMERICA v. YALIN LIU, Defendant |
| Court | U.S. District Court — Middle District of Pennsylvania |
(Chief Judge Conner)
Presently before the court in the above-captioned action is a motion (Doc. 241) to dismiss the indictment by defendant Yalin Liu ("Liu"). Liu seeks dismissal of all the charges against him pursuant to Federal Rule of Criminal Procedure 12(b)(3). For the reasons that follow, the court will deny Liu's motion.
On February 24, 2016, a grand jury sitting in Harrisburg, Pennsylvania, returned an indictment against Liu and thirteen codefendants, charging a number of offenses related to the fraudulent procurement of motor vehicle insurance and state and federal licenses to operate commercial bus carriers. (Doc. 1). Specifically, the indictment charges Liu and others with conspiracy to commit mail fraud and wire fraud, in violation of 18 U.S.C. § 1349 (Count I); mail fraud, in violation of 18 U.S.C. §§ 1341 and 2 (Counts II through IX)1; and conspiracy to defraud the United States and to commit other federal offenses, in violation of 18 U.S.C. § 371 (Count X).
In order to operate a commercial bus company, bus carriers must comply with numerous state and federal regulations. The Federal Motor Carrier Safety Administration ("FMCSA") requires bus carriers to, inter alia, obtain a United States Department of Transportation Number ("USDOT Number") for data collection and monitoring purposes and an "MC Number" representing the bus carrier's operating authority. (Id. ¶¶ 1-3). In order to obtain an MC Number, the bus carrier must submit information regarding its business address, automobile insurance, compliance with safety regulations, and any business affiliations with other bus carriers. (Id. ¶ 3).
The Pennsylvania Department of Transportation ("PennDOT") facilitates the titling, registration, and issuance of license plates for bus carriers in Pennsylvania. (Id. ¶ 5). Qualified bus carriers may obtain insurance coverage for commercial activities through the Pennsylvania Assigned Risk Plan ("the Plan"). (Id. ¶ 4). Pennsylvania established the Plan for the equitable apportionment—among insurers writing motor vehicle liability insurance within the state—of applicants that "are entitled to, but are unable to, procure insurance through ordinary methods." 75 PA. CONS. STAT. § 1741. A multistate commercial bus carrier should apply for assigned risk insurance in the state where its operating headquarters is located. (Doc. 1 ¶ 4). A vehicle is subject to the insurance rates, charges, and rating rules of the state where it is principally garaged. (Id.) The Automobile Insurance Plan Service Office ("AIPSO"), a Rhode Island nonprofit organization, administers the Plan. (Id.)
The indictment alleges that defendants made materially false statements to FMCSA, AIPSO, the Plan, and PennDOT in order to obtain USDOT Numbers, MC Numbers, and Pennsylvania insurance for various commercial bus companies. (Id. ¶ 7). These purported misrepresentations allowed defendants to operate unsafe buses and impede federal and state agencies from carrying out their respective missions. (Id. ¶ 8). Liu is a licensed Pennsylvania insurance producer. (Id. ¶ 19). The indictment alleges that Liu drafted and submitted fraudulent documents to FMCSA, PennDOT, the Plan, and the Pennsylvania Department of State on behalf of his codefendants. (Id.) The purpose of the averred conspiracy was twofold: (1) to fraudulently obtain insurance for defendants' bus companies through the Plan when said companies were not eligible for Plan insurance, (id. ¶¶ 24-25); and (2) to impede and obstruct the administration and enforcement of state and federal regulations relating to the financial responsibility, safety, maintenance, and drivers of commercial bus carriers, (id. ¶ 32).
Liu filed the instant motion (Doc. 241) to dismiss the indictment in toto. The motion is fully briefed and ripe for disposition.
A motion to dismiss a criminal indictment may be brought at any time before trial. See FED. R. CRIM. P. 12(b)(3). A motion to dismiss the indictment may allege a defect in instituting the prosecution, including improper venue, violation of the constitutional right to a speedy trial, or selective prosecution. See FED. R. CRIM. P. 12(b)(3)(A). A motion to dismiss may also be premised on perceived substantive deficiencies, including duplicity or multiplicity in the indictment, lack of specificity,improper joinder, or failure to state an offense. See FED. R. CRIM. P. 12(b)(3)(B). In the context of a motion to dismiss, the court is obliged to test the sufficiency of the government's allegata but not the sufficiency of the government's probata. United States v. Huet, 665 F.3d 588, 594-95 (3d Cir. 2012). The court must decide every pretrial motion before trial unless good cause exists to defer its ruling. See FED. R. CRIM. P. 12(d).
The indictment charges Liu with one count of conspiracy to commit mail fraud and wire fraud, eight counts of mail fraud, and one count of conspiracy to defraud the United States and commit other federal offenses. Liu's motion raises manifold arguments testing the sufficiency of the indictment. We begin with Liu's arguments concerning the mail and wire fraud counts.
An indictment charging mail fraud in violation of 18 U.S.C. § 1341 must allege (1) a scheme or artifice to defraud, (2) knowing and willful participation by the defendant with specific intent to defraud, and (3) used of the mails in furtherance of the scheme or artifice to defraud. Nat'l Sec. Sys., Inc. v. Iola, 700 F.3d 65, 105 (3d Cir. 2012); United States v. Hedaithy, 392 F.3d 580, 590 (3d Cir. 2004). Counts II through IX allege mail fraud.2 Liu advances arguments against the sufficiency of the indictment as to each element of mail fraud.
The mail fraud statute is limited in scope to protection of money and property. United States v. Bryant, 655 F.3d 232, 248 (3d Cir. 2011). The object of analleged scheme or artifice to defraud must be a "traditionally recognized property right." Hedaithy, 392 F.3d at 590; see also United States v. Henry, 29 F.3d 112, 115 (3d Cir. 1994) (citing United States v. Evans, 844 F.2d 36, 41 (2d Cir. 1988)). An intangible item may be protected by the mail fraud statute when it constitutes a traditional property interest. Hedaithy, 392 F.3d at 592, 598 (citing Carpenter v. United States, 484 U.S. 19, 25 (1987)). The item fraudulently obtained must be property "in the hands of the victim." Id. at 592-93 (quoting Cleveland v. United States, 531 U.S. 12, 15 (2000)).
The indictment identifies a legally sufficient object of defendants' scheme or artifice to defraud. Specifically, the indictment alleges that defendants sought to obtain insurance from an insurance company participating in the Plan that they were not otherwise entitled to. (Doc. 1 ¶ 24). Fraudulently obtaining insurance under the Plan allowed defendants to realize a significant financial benefit from reduced insurance rates. (Id.) The alleged scheme deprived Plan insurers3 of the right to exclusively control their assets—namely, the impact on resources of additional indemnification obligations that they would not ordinarily undertake. See United States v. Carpenter, 190 F. Supp. 3d 260, 265 (D. Conn. 2016); United States v. Baroni, No. 2:15-CR-00193, 2016 WL 3388302, at *8 (D.N.J. June 13, 2016); see also Carpenter, 484 U.S. at 26-27; Hedaithy, 392 F.3d at 595-96. Moreover, defendants' purported fraud imposed considerable risk of harm on all othersproperly insured under the Plan by unnecessarily increasing their shared financial risk. The indictment sufficiently alleges a scheme to defraud another of property.
A defendant possesses the requisite specific intent to defraud when he willfully participates in a scheme to defraud and knows of the scheme's fraudulent nature. Hedaithy, 392 F.3d at 590; United States v. Pearlstein, 576 F.2d 531, 537 (3d Cir. 1978); see also United States v. Andrews, 811 F. Supp. 2d 1158, 1171 (E.D. Pa. 2011). The indictment alleges that Liu drafted, prepared, and submitted fraudulent documents to various entities on behalf of the other defendants. (Doc. 1 ¶ 19). The indictment further avers that all defendants "knowingly and intentionally" agreed to devise a scheme to defraud. (Id. ¶ 23). Liu's contention that the indictment fails to state that he knew the information provided by his clients was false goes to the sufficiency of the evidence rather than the adequacy of the government's allegations. See Huet, 665 F.3d at 594-95. The indictment properly charges that Liu acted with specific intent to defraud.
Liu's challenge to the final mail fraud element likewise fails. The government must only allege that use of the mails was "incident to an essential part of the scheme [to defraud]." United States v. Yusuf, 536 F.3d 178, 187 (3d Cir. 2008) (quoting Schmuck v. United States, 489 U.S. 705, 710-11 (1989)). The mailing must be undertaken in furtherance of the scheme. Id. (citations omitted). It is sufficient that a mailing was part of the execution or perpetuation of the fraudulent scheme. Id. (quoting Schmuck, 489 U.S. at 712). A defendant causes the mails to be used when he either knows that use of the mails will "follow in the ordinary course of business, or where such use can reasonably be foreseen, even though not actuallyintended." United States v. Andrews, 681 F.3d 509, 529 (3d Cir. 2012) (quoting United States v. Bentz, 21 F.3d 37, 40 (3d Cir. 1994)).
Defendants operated commercial bus companies for profit. In order to lawfully operate, commercial bus companies must be properly registered and titled pursuant to state and federal regulations. (Doc. 1 ¶¶ 1, 5). A prerequisite to obtaining title and registration is providing, inter alia, proof of insurance. (Id. ¶ 3). Obtaining title and registration is an...
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